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Bond Company budgets the following purchases of direct materials for the first quarter of the year January February March $100,000 $70,000 $ 93,000 Budgeted purchases
Bond Company budgets the following purchases of direct materials for the first quarter of the year January February March $100,000 $70,000 $ 93,000 Budgeted purchases All purchases of direct materials are made on credit. On average, the company pays 80% of its purchases in the month of sales and the remainder in the following month Required 1. For the months of February and March, what are the budgeted cash payments for purchases of direct materials under the assumption that there is no (cash) discount for early payment? February March Budgeted cash $ 76,000 $ 88,400 ayment 2. For the months of February and March, what are the budgeted cash payments for purchases of direct materials under the assumption that the purchase terms are 2/15, net 30? The company's policy is to take advantage of all cash discounts for early payment February March Budgeted cash $ 74,88 S 86,632 ayment 3a. Using the purchase terms in Requirement 2, calculate the opportunity cost if Bond does not decide to take advantage of the early payment discount (Enter your answer as a whole percentage rounded to two decimal places (i.e. .1234 = 12.34%)) Opportunity cost 3b. Can it be considered good economic policy to take advantage of early payment discounts? Yes
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