Jun 2008 question 3

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    Bridgewater and co
    Hi there. I have solved most of it. A tiny bit in the answer sheet is confusing me
    part b
    Delaying payment to trainers.
    extract ‘ delaying 50% of payment to the trainer for invoices in prd 1 and 2 and pying them a month later’

    answer: now if u check the answer, INCREMENTAL EFFECTS
    trainers q1=0 , q2=0, q3=2.0 and q4=2.4 total 4.4
    room hire q1=0, q2=0, q3=1, q4=1 total 2.2

    i m not getting this bit
    where did the trainers and room hire figures come from and how? can u please explain what were the number of total invoices and how 50% was calculated etc. i d appreciate your response

    Profile photo of John Moffat
    John Moffat

    The examiner explains the figures in his answer to part (c).

    Delaying paying the trainers doe not affect the profit at all, only the cash flows. (The costs will still be accounted for in the quarter incurred)

    However the software upgrade paragraph says there will be extra revenue of 20% in quarters 3 and 4. Because they will be running the courses at the same tutorial and room standards, this will mean a 20% increase in trainers and room costs.

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