Bond Company budgets the following purchases of direct materials for the first quarter of the...
60.1K
Verified Solution
Link Copied!
Question
Accounting
Bond Company budgets the following purchases of direct materials for the first quarter of the year:
January
February
March
Budgeted purchases
$
140,000
$
102,000
$
117,000
All purchases of direct materials are made on credit. On average, the company pays 80% of its purchases in the month of sales and the remainder in the following month.
Required:
1. For the months of February and March, what are the budgeted cash payments for purchases of direct materials under the assumption that there is no (cash) discount for early payment?
2. For the months of February and March, what are the budgeted cash payments for purchases of direct materials under the assumption that the purchase terms are 2/15, net 30? The companys policy is to take advantage of all cash discounts for early payment.
3a. Using the purchase terms in Requirement 2, calculate the opportunity cost if Bond does not decide to take advantage of the early payment discount.
3b. Can it be considered good economic policy to take advantage of early payment discounts?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
