Sample 1 - Task 4

Hi,
Is anyone able to explain the answer for Period 5 using option 1 and 2. The answer shows option1: 542000 and option 2: 553500.

Many thanks in advance.

Comments

  • HH_HH_ Registered Posts: 3
    Hello, I am still confused on how to work out the above, if anyone is able to help that would be great. Thanks
  • molly_molly_ Registered Posts: 4
    I know this post was a while ago, but I thought I would comment to explain for anybody else:

    Period 5:
    Option 1 - 10% discount
    So the 42,000 x £10 x 0.90 =378,000 (All paid in Period 5)
    Period 4: As the new discount starts from Period 4 onwards this is all paid in Period 4
    The remaining balance of 40% from Period 3 paid in Period 5 = 164,000
    164,000 + 378,000 = 542,000

    Option 2: 5% discount 50% paid in month of purchase
    Period 5 payments

    Period 3 - still original timing of receipts = 40% 164,000 balance paid Period 5
    Period 4 - 50% at discounted paid in Period 5 (40,000 x £10 x 0.95) = 380,000
    50% Period 4 paid in Period 5 = 190,000
    Period 5 sales = 42,000 x £10 x 0.95 = 399,000
    50% paid in period 5 = 199,500
    Period 5 total payments = 164,000 + 190,000 + 199,500 = 553,500

    Hope I have explained this okay!
  • g_anastasijag_anastasija Registered Posts: 2
    Hi,

    I am sitting exam this Friday for second time, and i do understand slightly your explanation above, however sometimes it is like head against the wall.

    Could you please explain more detailed?
  • ncacatncacat United KingdomRegistered Posts: 39
    edited July 9



    Could you please explain more detailed?

    Step by step.
    • Period 4 onwards, McCaw Ltd has decided to change the payment terms.
    • Now the question requires you to work out how much would Conrad Ltd pay McCaw Ltd during the period 5 based on the forecast units?
    • You have to note that the payment terms hasn’t changed for period 3, which means the payment to be made for that period is still under old payment terms.
    • The old payment terms is that the company pays 20%, 40% and another 40% split between three periods.
    • Option 1: (10% discount) Period 5 will have 100% of period 5 + period 3’s balance 40% (Guess why period 4 is not here?)
    • Option 2: (5% discount) Period 5’s 50% + Period 4’s 50% + Period 3’s balance 40%.
    g_anastasija
  • g_anastasijag_anastasija Registered Posts: 2
    Thank you very much @ncacat , your explanation is really helpful :)
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