The Reynolds Corporation buys from its suppliers on terms of 2/10, net 55. Reynolds has not been utilizing the discounts offered and has been taking 55 days to pay its bills. Mr. Duke, Reynolds Corporation vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 14 percent. The bank requires a 20 percent compensating balance on these loans. Current account balances would not be available to meet any of this compensating balance requirement. Do you agree with Duke's proposal? Kaiser Ltd. uses the high-low method to estimate the cost function. The information for 2018 is provided below. Machine hours Labour costs ($) Month January 130 5,124 February 250 7,611 March 180 6,208 April 165 6,300 May 2401 9,800 June 80 3,200 July 155 55 6,326 August 190 7,200 September 230 8,138 October 250 8,600 November 260 10,004 December 190 7,400 What is the estimate of Kaiser's cost function when 120 machine hours are used? A. $4,347 B. $4,712 C. $4,744 D. $4,797
The Reynolds Corporation buys from its suppliers on terms of 2/10, net 55. Reynolds has not been utilizing the discounts offered and has been taking 55 days to pay its bills. Mr. Duke, Reynolds Corporation vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 14 percent. The bank requires a 20 percent compensating balance on these loans. Current account balances would not be available to meet any of this compensating balance requirement. Do you agree with Duke's proposal? Kaiser Ltd. uses the high-low method to estimate the cost function. The information for 2018 is provided below. Machine hours Labour costs ($) Month January 130 5,124 February 250 7,611 March 180 6,208 April 165 6,300 May 2401 9,800 June 80 3,200 July 155 55 6,326 August 190 7,200 September 230 8,138 October 250 8,600 November 260 10,004 December 190 7,400 What is the estimate of Kaiser's cost function when 120 machine hours are used? A. $4,347 B. $4,712 C. $4,744 D. $4,797
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 19P
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