Question
All your firms sales are on credit on terms 3/10 net 30. The firm realizes that despite giving 30 days credit to its customer, many
All your firms sales are on credit on terms 3/10 net 30. The firm realizes that despite giving 30 days credit to its customer, many take longer than that to settle their bills. On average, 35% of its customers settle their bills in the month they made the purchases, and these qualify for the discount. Another 50% pay in the month following the purchase, with the remaining 15% paying in the second month following their purchase. Average sales are $1.5 million for the first two months and $1.7million in the third month. Purchases, on which it receives 30 days credit from its suppliers, amount to 70% of the months sales. Wages amount to 30% of the current months sales and other expenses amount to 5%. Has the firm made a surplus or deficit for the month?
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