68 saucier co currently sells 2100 units a month for

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Applied Calculus for the Managerial, Life, and Social Sciences
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Chapter 4 / Exercise 44
Applied Calculus for the Managerial, Life, and Social Sciences
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68. Saucier & Co. currently sells 2,100 units a month for total monthly sales of $86,500. The company is considering replacing its current cash only credit policy with a net 30 policy. The variable cost per unit is $18 and the monthly interest rate is 1.2 percent. What is the switch break-even level of sales? Assume the selling price per unit and the variable costs per unit remain constant. A. 1,943 units B. 2,117 units C. 2,145 units D. 2,406 units E. 2,548 units
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Applied Calculus for the Managerial, Life, and Social Sciences
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Chapter 4 / Exercise 44
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
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Break-even point = Q′ - 2,100 = ($86,500)/ {[(($86,500/2,100) - $18)/0.012] - $18} = 45 units; Q′ = 2,100 + 45 = 2,145 units AACSB: Analytic Blooms: Analyze Difficulty: 2 Medium Learning Objective: 20-02 How to analyze the decision by a firm to grant credit. Section: 20.3 Topic: Switch break-even point 69. The Cellar Door currently sells 9,620 units a month for total monthly sales of $316,000. The company is considering replacing its current cash only credit policy with a net 30 policy. The variable cost per unit is $15 and the monthly interest rate is 1.5 percent. What is the switch break-even level of sales? A. 9,711 units B. 9,779 units C. 9,814 units D. 9,957 units E. 9,889 units Break-even point = Q′ - 9,620 = ($316,000)/{[(($316,000/9,620) - $15)/0.015] - $15} = 269 units; Q′ = 9,620 + 269 = 9,889 units AACSB: Analytic Blooms: Analyze Difficulty: 2 Medium Learning Objective: 20-02 How to analyze the decision by a firm to grant credit. Section: 20.3 Topic: Switch break-even point 70. You have the opportunity to make a one- time sale if you will give a new customer 30 days to pay. You suspect there is a 10 percent chance this person will never pay you. The sales price of the item the customer wants to buy is $289. Your variable cost on that item is $156 and your monthly interest rate is 1.75 percent.
Should you grant credit to this customer? Why or why not? A. yes; because the NPV of the potential sale is $113.05 B. yes; because the NPV of the potential sale is $99.63 C. no; because the NPV of the potential sale is -$133.00 D. no; because the NPV of the potential sale is -113.05 E. no; because the NPV of the potential sale is -$89.65 NPV = -$156 + {[1 - 0.10] × [$289/(1 + 0.0175)]} = $99.63 AACSB: Analytic Blooms: Apply Difficulty: 1 Easy Learning Objective: 20-02 How to analyze the decision by a firm to grant credit. Section: 20.5 Topic: One-time sale 71. You are considering renting a kiosk in the local mall for a period of three months. Any sale you make will be a one-time sale. There is only a 79 percent chance you will collect payment on a credit sale. The product you want to sell has a variable cost of $3.88 and a sales price of $4.99. The monthly interest rate is 1.5 percent. Should you offer people 30 days to pay? Why or why not? A. yes; because the NPV of a credit sale is $0.09. B. yes; because the NPV of a credit sale is $0.03. C. no; because the NPV of a credit sale is -$0.08. D. no; because the NPV of a credit sale is -$0.02. E. It doesn't matter because the NPV of a credit sale is a NPV = -$3.88 + {0.79 × [$4.99/(1 + 0.015)]} = $0 AACSB: Analytic Blooms: Apply Difficulty: 1 Easy Learning Objective: 20-02 How to analyze the decision by a firm to grant credit.

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