Question

UCLA buys $275,000 of a particular item (at gross prices) from

its major supplier, McKesson, which offers UCLA terms of 1/5, net
15. Currently, the hospital is paying the supplier the full amount
due

Answer 1

The question is about UCLA's payment terms with their major supplier McKesson, understanding a cash discount of 1% if paid within 5 days versus the net amount due within 15 days in a business transaction.

Step-by-step explanation:

The question involves an understanding of supplier payment terms and discounts, which falls under the subject of Business. In this scenario, UCLA is purchasing supplies from McKesson with the payment terms of 1/5, net 15. The "1/5" means UCLA can take a 1% discount on the total if they pay within 5 days. However, if they do not take advantage of this discount, they are required to pay the full amount within 15 days, which is what "net 15" implies. If UCLA decides to pay within the 5 days, they can reduce their payment by 1% of $275,000, which amounts to a savings of $2,750. Therefore, they would only need to pay $272,250 if they take advantage of the discount. Currently, UCLA pays the full possible amount of $275,000 without taking the discount.