Instruction 19.1: Use the information to answer the following question(s).
Sunny Manufacturing Systems Inc. is supplied with plastic chips for their plastic injection molding manufacturing process. Their supplier, Sun Chemical, Inc. offers financing terms of a 2% discount if the accounts payable are paid in 10 days or less with the full balance due in 45 days. Short-term financing available to Sunny Manufacturing is available at an annual rate of 9.6%. Sunny Manufacturing has just purchased $400,000 of plastic chips from Sun Chemical.
-Refer to Instruction 19.1. What is the amount of money Sunny Manufacturing will save on accounts payable if they accept the discount?
A)$400,000
B)$8,000
C)$33,333
D)$20,000

Question

Quizplus · Accepted Answer

The discount offered by Sun Chemical is 2% of the purchase price, which is $400,000. Therefore, the discount will be:
2% x $400,000 = $8,000
Thus, Sunny Manufacturing will save $8,000 on accounts payable if they accept the discount. Therefore, the best choice is B.