Cash discount, Managerial Accounting

Assignment Help:

Cash discount is given to buyers to bring them to make prompt payment. The credit terms identify the percentage discount and the period throughout which it is obtainable. Liberal cash discount policy implies that either the discount percentage is raised or the discount period is raise. This leads to improved sales, reduce in average collection period and increase in cost.  The consequence of this on net profit can be estimate through the equation 3.

 ?NP = [? S (1 - V ) - ?DIS ] (1 - t ) +  k?I

Here I = Savings in receivables investment

 ? DIS = Increase in discount cost

? I = S0/360 (ACPn - ACP0) - V (ACPn)( ?S/360)

? DIS = Pn (S0 +?S) dn - P0S0d0

Here Pn    =    Proportion of discount sales after liberalizing the discount terms.

S0    =    Sales before liberalizing the discount terms

? S = raise in sales

dn   =   New discount percentage

P0   =   Proportion of discount sales before liberalizing the   discount terms

d0    =   Old discount percentage


Related Discussions:- Cash discount

Provision for contingencies, After determining the amount of working capita...

After determining the amount of working capital as in above, a specific amount say 5 percent or 10 percent may be added to cover contingencies. This is to be noted that facts depen

Predetermined Overhead, SSI, a meat/burger/chicken processing manufacturing...

SSI, a meat/burger/chicken processing manufacturing plant loacted in Idaho, USA prepares

Consulting project, CONSULTING PROJECT Pricing and Production Decision...

CONSULTING PROJECT Pricing and Production Decisions at PoolOut Ltd  PoolOut Ltd manufactures and sells a single product called the "RainIn", which is a patent-protected au

Mgt acc., company jobcosting system

company jobcosting system

What are the disadvantages of activity based costing, Disadvantages of acti...

Disadvantages of activity based costing 1) It is essentially not the panacea for all ills. 2) It absorbs a lot of resources. 3) Too much emphasis on customer viability c

Manufacturing Budget Analysis, Tom Emory and Jim Morris strolled back to th...

Tom Emory and Jim Morris strolled back to their plant from the administrative offices of Ferguson & Son Manufacturing Company. Tom is manager of the machine shop in the company''s

Explain the techniques of performance budgeting, Explain the techniques of ...

Explain the techniques of performance budgeting It will also be useful to examine the three major aspects of this technique: Structural aspects : the structural aspects inv

Stock turnover ratio, opening stock 19000 closing stock 21000 sales 200000 ...

opening stock 19000 closing stock 21000 sales 200000 gross profit 25% on sales calculate stock turnover ratio

Profi t Planning, Master budgeting Jaya Sdn. Bhd. is a wholesaler. The mana...

Master budgeting Jaya Sdn. Bhd. is a wholesaler. The management of Jaya Sdn. Bhd. has been extremely worried about the company''s cash position over the last few years. In July 201

Kinematic pair-kinematic element-resistant body , Kinematic Pair: A pair ...

Kinematic Pair: A pair is a joint of two elements which permits relative motion. The relative motion among the elements of links that built a pair is needed to be fully constrain

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd