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Ch 14 and 15 homework solutions

# Ch 14 and 15 homework solutions - FINC 330 CHAPTERS 14 AND...

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FINC 330 CHAPTERS 14 AND 15 HOMEWORK SOLUTIONS Chapter 14: P14-2. a. AAI = 365 days ÷ 8 times inventory = 46 days OC = AAl + ACP = 46 days + 60 days = 106 days CCC = OC - APP = 106 days - 35 days = 71 days b. Daily cash operating expenditure = total outlays ÷ 365 days = \$3,500,000 ÷ 365 = \$9,589 Resources needed = daily expenditure × CCC = \$9,589 × 71 = \$680,819 c. Additional profit = (daily expenditure × reduction in CC) × financing rate = (\$9,589 × 20) × 0.14 = \$26,849 P14-6. a. EOQ = (2 O) (2 800 \$50) = = 200 units C 2 S × × × × b. Average level of inventory = 200 units 800 units 10 days 2 365 × + = 121.92 units c. Reorder point = (800 units 10 days) (800 units 5 days) 365 days 365 days × × + = 32.88 units d. Change Do Not Change (2) carrying costs (1) ordering costs (3) total inventory cost (5) EOQ (4) reorder point

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P14-8. a. Current units = \$360,000,000 ÷ \$60 = 6,000,000 units Increase = 6,000,000 × 20% = 1,200,000 new units Additional profit contribution = (\$60 - \$55) × 1,200,000 units = \$6,000,000 b. Average investment in accounts receivable = total variable cost of annual sales turnover of A/R Turnover, present plan = 365 6.08 60 =
Turnover, proposed plan = 365 365 5.07 (60 1.2) 72 = = × Marginal investment in AR: Average investment, proposed plan: * (7,200,000 units \$55) 5.07 × = \$78,106,509 Average investment, present plan: (6,000,000 units \$55) 6.08 × = 54,276,316 Marginal investment in AR = \$23,830,193 * Total units, proposed plan = existing sales of 6,000,000 units + 1,200,000 additional units.

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