As part of a union negotiation agreement, the United Clerical Workers Union conceded to be paid every two weeks instead of every week. A major firm employing hundreds of clerical workers had a weekly payroll of $1,000,000 and the cost of short-term funds was 12 percent. The effect of this concession was to delay clearing time by one week. Due to the concession, the firm
A. realized an annual loss of $120,000.
B. realized an annual savings of $120,000.
C. increased its cash cycle.
D. decreased its cash turnover.
Answer:B
As part of a union negotiation agreement, the United Clerical Workers Union conceded to be paid every two weeks instead of every week. A major firm employing hundreds of clerical workers had a weekly payroll of $1,000,000 and the cost of short-term funds was 12 percent. The effect of this concession was to delay clearing time by one week. Due to the concession, the firm
A. realized an annual loss of $120,000. B. realized an annual savings of $120,000. C. increased its cash cycle. D. decreased its cash turnover.