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a one off payment of $25000 has been paid to the factor..why have we multiplied 25000 with the overdraft interest rate…
why have we not included the overhead costs of credit control department amounting to 2000 per anum anywhere in the calculations?
special gift suppliers pays its sales force on a commission only basis the cost of this is 5% of credit sales and is payable immedialtely the sales are made.. what is sales force on a commision only basis and why have we not treated it anywhere in the calculations
can you tell me how we have calculated the reduction in debtors?
and factors interest charge is (80%*90%*$2.5m*15%*1/12) why have we multiplied by 1/12 i am not able to understand please help me out thanksThe 25000 is a one off payment. What we are doing is calculating the annual costs and savings and so it would be wrong to include the whole 25000 because it is only one year. So we have assumed it increases the overdraft and so the annual cost is the extra interest each year.
The overheads are not included because they are not extra overheads (just an allocation).
The commission is not included because it will be payable whether we change our policy or not.
The factors interest charge is 1/12 because although they are charging 15% a year, they will only be charging it for one month (because they are advancing it one month early).
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