Reston Inc

question 48

Multiple Choice

Reston Inc.has expected sales of R17,000,000.While 10 percent of its customers pay cash, the remaining 90 percent pay on credit with 40 percent paying on Day 10, 30 percent paying on Day 20, 15 percent paying on Day 25, and 15 percent paying on Day 30.Assume that the cost of funds invested in receivables is 10 percent.Suppose that the firm's customers begin paying later, such that the new DSO increases to 24 days, that the firm uses a 360-day year, and that the firm's variable cost ratio is 80 percent.What is the additional interest cost to Reston of the additional investment in A/R caused by the delay in payment by its customers?

• A) R19,550
• B) R24,438
• C) R42,500
• D) R78,625
• E) R102,000

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Definitions:

Psychological Disorders

Refers to a range of mental, behavioral, and emotional disorders that interfere significantly with an individual's ability to function in daily life.

Workforce

The collective group of individuals engaged in work or available for work, including both the employed and the unemployed.

Immigrants

Individuals who move from one country to another with the intention of settling or residing there, often in search of a better life, employment, or safety.

Intrinsic Rewards

Internal or self-achieved rewards such as personal satisfaction, enjoyment, or motivation derived from performing an activity.