Instruction 19

question 50

Multiple Choice

Instruction 19.1: Use the information to answer the following question(s) .
Sunny Manufacturing Systems Inc. is supplied with plastic chips for their plastic injection molding manufacturing process. Their supplier, Sun Chemical, Inc. offers financing terms of a 2% discount if the accounts payable are paid in 10 days or less with the full balance due in 45 days. Short-term financing available to Sunny Manufacturing is available at an annual rate of 9.6%. Sunny Manufacturing has just purchased $400,000 of plastic chips from Sun Chemical.
-Refer to Instruction 19.1. Should Sunny Manufacturing take the discount offered by Sun Chemical?

• A)Yes, Sunny Manufacturing will get to use their raw materials 35 days earlier than if they waited to pay at the end of the 45 days.
• B)No, Sunny Manufacturing will not have to pay any interest if they just pay in 45 days.
• C)Yes, Sunny Manufacturing's short term borrowing rate of 9.6% is less than Sun's offered cost of carry of 22.9%.
• D)No, it costs Sunny Manufacturing 22.9% to accept the discount and they are better off paying the full amount in 45 days.

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Definitions:

Rational Emotive Behavior Therapy

Rational Emotive Behavior Therapy is a type of psychotherapy that helps individuals identify self-defeating thoughts and feelings, challenge the rationality of those feelings, and replace them with healthier, more productive beliefs.

Directive Role

A leadership or guidance style where decisions and directions are provided explicitly by the leader or authority.

Cognitive-Behavioral

Referring to a psychotherapeutic approach that addresses dysfunctional emotions, behaviors, and cognitions through a goal-oriented, systematic procedure.

Short-Term

pertaining to or lasting for only a limited period of time; often contrasted with long-term.