Managerial Finance Unit 8 Assignment
Caty's Candles makes and supplies specialty candles for holidays and weddings. Caty purchased $2,000 worth of inventory from Wanda's Wax on March 1st from a supplier who extended terms of 2/10, net 30 EOM. At the same time, she made these additional purchases. Caty puchased scented oil from Sally's Scents for $800 with terms of 1/10, net 40 EOM; candle wicks were purchased from Wazzle's Wicks for $300, with terms of 3/20, net 45 EOM; candle dye from David's Dyes and Colors for $650 with terms of 4/20, net 60 EOM; candle molds from Molly's Molds were $1,800 with terms of 2/10, net 45 EOM; and glaze was purchased from Gandy's Glaze for $250, with terms of 1/45, net 60 EOM.
Caty's Candles is a new business and has limited cash flow. She can use her line of credit at the bank, but it has an interest rate of 28%. As the finance manager, it is your duty to decide whether to not to take the cash discount, provide an explanation as to your decision, and present a time line for the payment of this merchandise.
1. Calculate the Cash Discounts for all Merchandise Purchased.
a. Wanda’s Wax
i. $2,000.00 worth of inventory with terms of 2/10, net 30 EOM - means that if this amount owed is paid on March 10th, (when the Cash Discount ends) the total cost saved is $40.00. Caty’s Candles would only pay $1,960.00 by March 10.
b. Scented Oil from Sally’s Scents
ii. $800.00 with terms of 1/10, net 40 EOM – means that if this amount owed is paid on March 10th (when the Cash Discount ends) the total cost saved $8.00. Caty’s Candles would only pay $792.00 by March 10th
c. Wazzle Wicks
iii. $300.00 with terms of 3/20, net 45 EOM – means that if this amount owed is paid on March 20th (when the Cash Discount ends) the total cost saved is $9.00. Caty’s Candles would only pay $291.00 by March 20th
d. Candle dye from David's Dyes and Colors
iv. $650 with...