Hello Friends,
Doubt is on factoring problem No. 15 from CA final SFM Nov 2015 RTP.
The way I have solved is as follows:.
| a | annual sales ( given ) | 60,000,000 |
| b | annual commission | 1,200,000 |
| c | reserves | 5,880,000 |
| (a-b)*10/100 | ||
| d | interest @ 16% | 8,467,200 |
| (a-b-c)*16/100 | ||
| e | savings in bad debts | 840,000 |
| (60000000*1.75/100*80/100) | ||
| f | savings in admin cost | 600,000 |
| g | net cost of factoring | 8,227,200 |
| (b+d-e-f) | ||
| h | net amount received (a-b-c-d) | 44,452,800 |
| i | annual cost (g/h) | 18.51% p.a |
Whereas RTP answered 14.77% p.a as annual cost.
Please point out the mistake I have commited in this problem, what is the logic behind the interest computed by RTP and why my interest is varying.??
Kindly reply me in lehmans language, with simple explanation.
CAclubindia
