ONLY NEED HELP WITH PART 2 IDENTITY OF VARIABLE AND COST OF TRADE CREDIT

Sanger Machine Company is a relatively small player in its market. Its new Chief Financial Officer (CFO), Jack Alexander, has suggested that its credit policy may be one possible source of the company's lower-than-desired sales. This is because Sanger currently sells all of its product on either a cash on delivery (COD) or a cash before delivery (CBD) basis, depending upon the buying volume of the customer. Jack observed that one possible strategy to increase Sanger's sales is to offer trade credit to its most creditworthy customers Offering trade credit will involve both risks and returns to Sanger. Consider this, and indicate whether the following questions are true or false When Sanger offers a cash discount in its credit terms, it is intentionally reducing the net sales price of its products Trade credit is a non-spontaneous source of financing for Sanger's customers This statement is: True False This statement is False True Last week, Jack met with several of the firm's larger, more creditworthy customers, including the Campbell Construction. In the course of this meeting, he suggested terms of 4/10 net 20, but two things became quickly apparent Not everyone remembered how to calculate the cost of trade credit, so a review of the equation should be conducted; and While everyone acknowledged that these terms are consistent with the industry's standards, they are concerned with the magnitude of the implicit costs associated with paying on various dates throughout the credit period Therefore, you need to do two things Identify the individual elements in the annual financing cost of trade credit equation; and Calculate the implicit costs of paying on several dates throughout Sanger's credit period Begin with the identification of the variables in the annual financing cost of trade credit equation. Then, use the equation to compute the annual financing cost of the trade credit assuming that the invoices are paid on the indicated days. Remember, Jack suggested terms of 4/10 net 20 Variable A Variable E Cost of Trade Credit (100 Variable C) (Variable B-Variable D) Variable Identity of the Variable Cost of Trade Credit Payment Date Day 10 Day 11 Day 20