QUESTION $3(20$ Marks$)$

$3\mathrm{.}1$

REQUIRED

Use the information provided below to determine the net cost of factoring to Micron Limited. $(8$ marks$)$

INFORMATION

The management of Micron Limited is considering factoring the company$$s debtors. The current sales of the

company are R$2000000$ per year of which $60\%$ is on credit. The debtors collection period is $36\mathrm{.}5$ days. A

factor has offered the following deal:

$$ Service charge of $5\%$ of the credit sales;

$$ Finance charge of $11\%$ of the accounts receivable;

$$ Retention of $15\%$ to be held by the factor.

The service agreement is expected to save Micron Limited costs amounting to R$4000$ per month.

$3\mathrm{.}2$

REQUIRED

Use the information provided below to answer the following questions $($amounts expressed in rands and

cents$)$:

$3\mathrm{.}2\mathrm{.}1$ Calculate the profit that Tesco Suppliers would make if the account is settled in $12$ days$$

time. $(4$ marks$)$

$3\mathrm{.}2\mathrm{.}2$ Should Mariam fail to pay the amount due and the account is written off after $60$ days,

how much would the loss be to Tesco Suppliers? $(4$ marks$)$

$3\mathrm{.}2\mathrm{.}3$ Calculate the profit that Tesco Suppliers would make if the credit terms were $$net $60$

days$.(4$ marks$)$

INFORMATION

Tesco Suppliers is considering selling an oven to Mariam on credit. The selling price of the oven is R$15000$

and it was priced at cost plus $50\%.$ Credit terms of $2\mathrm{.}5/12$ net $30$ days were agreed upon. The cost of capital

is $15\%.$