Tangshan Mining Was Extended Credit Terms of 3/15 Net 30

question 44

Multiple Choice

Tangshan Mining was extended credit terms of 3/15 net 30 EOM. The cost of giving up the cash discount, assuming payment would be made on the last day of the credit period, would be ________. If the firm were able to stretch its accounts payable to 60 days without damaging its credit rating, the cost of giving up the cash discount would only be ________.

• A) 72.99%; 18.81%
• B) 72.99%; 18.25%
• C) 75.25%; 21.90%
• D) 75.26%; 25.09%

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Definitions:

Fixed Cost

Costs that remain constant regardless of the amount of goods produced or sold, like lease payments, employee wages, and insurance fees.

Expansion Options

Strategic choices available to a business to increase its size, offerings, or operational capacity.

Minimizes Cost

The process or approach aimed at reducing expenses and spending to the lowest possible level.