question 7

Exercise 1027 (Algo) Cash Disbursements Budget [LO 10-4] Bond Company budgets the following purchases of direct materiats for the first quarter of the year: All purchases of direct materiats are made on credit. On average, the company pays for 80% of its purchases in the month of acquisition and the remainder in the following month. Purchases take place failly evenly throughout the month. Required: 1. For the months of February and March, whot are the budgeted cash poyments for purchases of direct materials under the assumption that there is no (cash) discount for early payment? 2. For the months of February and March, what are the budgeted cash payments for purchases of direct materiats under the assumption that the purchase terms are 2/15, net 30 ? The company's policy is to take advantage of all cashidiscounts for eafly payment. 3a. Using the purchose terms in Requirement 2, calculate the opportunity cost if Bond does not decide to take odvantage of thie extly payment discount. 3b. Can it be considered good economic policy to take advantage of early payment discounts