1) Cleos makes all its purchases of raw materials inventory (flour, yeast, etc.) on credit. The business uses many different suppliers who offer different discount terms. However, its two largest suppliers offer the following terms:

• Dough-licious Company 2/10, net 55
• Egg-static Company 1/5, net 60

1. Calculate the effective cost of trade credit under the two credit terms listed above. (4 Marks)
2. If the business can borrow from its bank at 8% per year which company(ies) above should be paid within the discount period and which should the business pay at the end of the credit term? Explain why. (2 Marks)