Global Logistics Purchased a New Machine on October 20th, 2003

question 147

Essay

Global Logistics purchased a new machine on October 20th, 2003 for $1,000,000 on credit. The supplier has offered A&A terms of 2/10, net 45. The current interest rate the bank is offering is 16 percent.
(a) Compute the cost of giving up cash discount.
(b) Should the firm take or give up the cash discount?
(c) What is the effective rate of interest if the firm decides to take the cash discount by borrowing money on a discount basis?

Understand the internal components of organizations and their significance.

Recognize strategies and philosophies for adapting to and managing change in organizations.

Identify the elements that contribute to building trust within and outside an organization.

Grasp the impact of ergonomics, management disciplines, and federal regulations on organizational effectiveness.

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Definitions:

Supervisory Wages

Compensation paid to employees responsible for overseeing and directing workers or production.

Processing Batches

The grouping of similar items or transactions for processing at the same time to increase efficiency.

Direct Materials Cost

The expense associated with raw materials that are directly incorporated into a finished product.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing more accurate product or service costing.