The firm repairs 72000 rugs per year at an average

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Unformatted text preview: late the EOQ. b. Assuming that it takes 20 days to receive an order once it has been placed, determine the reorder point in terms of gallons of pigment. (Note: Use a 360day year.) LG4 ST 14–3 Relaxing credit standards Regency Rug Repair Company is trying to decide whether it should relax its credit standards. The firm repairs 72,000 rugs per year at an average price of $32 each. Bad-debt expenses are 1% of sales, the average collection period is 40 days, and the variable cost per unit is $28. Regency expects that if it does relax its credit standards, the average collection period will increase to 48 days and that bad debts will increase to 11⁄2% of sales. Sales will increase by 4,000 repairs per year. If the firm has a required rate of return on equal-risk investments of 14%, what recommendation would you give the firm? Use your analysis to justify your answer. 14–1 Cash conversion cycle American Products is concerned about managing cash efficiently. On the average, inventories have an age of 90 days...
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