Assume that the price of taras products is 60 per

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: does not hold the safety stock: (1) order cost, (2) carrying cost, (3) total inventory cost, (4) reorder point, (5) economic order quantity. Explain. LG4 14–7 Accounts receivable changes without bad debts Tara’s Textiles currently has credit sales of $360 million per year and an average collection period of 60 days. Assume that the price of Tara’s products is $60 per unit and that the variable costs are $55 per unit. The firm is considering an accounts receivable change that will result in a 20% increase in sales and a 20% increase in the average collection period. No change in bad debts is expected. The firm’s equal-risk opportunity cost on its investment in accounts receivable is 14%. a. Calculate the additional profit contribution from new sales that the firm will realize if it makes the proposed change. b. What marginal investment in accounts receivable will result? c. Calculate the cost of the marginal investment in accounts receivable. d. Should the firm implement the proposed chan...
View Full Document

Ask a homework question - tutors are online