Lipto Biomedic has credit sales of $740,000 yearly with credit terms of net 60 days, with an average collection period of 75 days. Lipto is considering offering a 3 percent discount for payment in 10 days. They would use the cash generated from the reduced receivables to reduce their bank loans which cost 8%. Assume ALL of the customers take advantage of the 3/10 terms. Use the following table to calculate the costs and benefits for Lipto and make decision at the bottom.

Cost(s)

Benefit(s)

B) As mentioned above, Ipto Biomedic can borrow from its bank at 8% to take a cash discount offered by one of its suppliers. The terms of cash discount are 2/155 net 90. Should the Lipto borrow the funds? Why? Why not? Show all your work...

C) Lipto Biomedic sells its product for $32 each. The carrying costs of the inventory are $1.50 per unit and its costs Lipto $30 per order in purchasing agent time. If the raw materials can only be ordered by the "gross" (1 gross = 12 dozen = 144 items) What is the economic order quantity?