Solve this Accounting problem Crescent Antiques currently fills mail orders from allover the U.S., and receipts come in to headquartersin Boise, Idaho. The firm's average accountsreceivable (A/R) is $4.2 million and is financed by abank loan with 11.75 percent annual interest.Crescent is considering a regional lockbox system tospeed up collections which it believes will reduce A/Rby 19 percent. The annual cost of the system is$18,500. What is the estimated net annual savings tothe firm from implementing the lockbox system?

Explanation of Accounts Receivable (A/R): Accounts receivable represents money owed to a company by…

Answered: Crescent Antiques currently fills mail…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 5P

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Cobalt Distributors processes customer payments at its central office in Denver. The company has an average accounts receivable (A/R) balance of $4.2 million, which is financed through a line of credit at an annual interest rate of 11.8%. Management is evaluating a new lockbox system that is expected to reduce A/R by 19%. The annual cost of operating the lockbox system is $18,500. What is the estimated net annual savings from implementing the lockbox system?
Stickaroo CC, a hockey equipment business, estimates that it will sell 3 400 pairs of shin pads per year from a distributor in Spain. Each pair costs R 195.00 to purchase and R18.00 in freight charges. The company borrows funds at an interest rate of 9% per annum to finance inventories. Stickaroo CC's purchasing agent has calculated that it costs R 472.00 to place an order for each pair of shin pads and that the holding cost is R 6.00 for each pair. REQUIRED: 1. Calculate the number of pairs of shin pads that Stickaroo CC should request in each order. (Round off your answer to six decimal points) 2. Calculate the annual number of orders. (Round off your answer to six decimal points) Note: Where the answer to 1. and 2. are used in any calculations below use the answer rounded off to six decimal points. 3. Calculate the total annual ordering cost. (Round off your answer to two decimal points) 4. Calculate the total annual carrying cost. (Round off your answer to two decimal points) 5.…
JECO company is planning to build a new plant in Batangas City. The plant is expected to provide additional sales as follows: First Year P 2.0 million Second Year P 2.5 million Third Year P 3.0 million (maximum capacity) The financial manager of JECO estimates that for every peso of sales, P0.25 must be invested in current assets. If all discounts are taken and bills are paid on time, accounts payable average P 0.04 per peso of sales. Other current liabilities, such as wages payable, typically average P0.05 per peso of sales. Required: a. Estimate the working capital investments required for the new plant in the 1st, 2nd & 3rd year of operations. b. How do these requirements affect the associated cash flows and the viability of the project?
A bank is considering two alternatives for handling its service calls in the next decade ( treat this as one period). The projected number of service calls is 10,000,000. If the bank sets up its own service call center in the U.S., the fixed cost is estimated to be $2,700,000, and the variable cost is calculated to be 32 cents per call. If the call service is outsourced to a foreign company, the fixed cost would be $240,000, and the unit charge would be 57 cents per call. (a)What is the break-even number of service calls? (b)Would the bank set up its own service call center or outsource call handlings? (Enter 1 for Produce or enter O for Outsource) (C)What would be the dollar amount that the bank can save by choosing the better option? (Cost difference between the two options)
Kindmart is an international retail store. Kindmart’s managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs Kindmart $2,000,000 per month and $55 per order. Kindmart has two options, a partially automated B2B and a fully automated B2B system. The partially automated B2B system will have a fixed cost of $6,000,000 per month and a variable cost of $45 per order. The fully automated B2B system has a fixed cost of $14,000,000 per month and a variable cost of $25 per order. Based on data from the past two years, Kindmart has determined the following distribution on monthly orders: Required: Prepare a table showing the cost of each plan for each quantity of monthly orders. What is the expected cost of each plan? In addition to the information system’s costs, what other factors should Kindmart consider before deciding to implement a new B2B system?
Kindmart is an international retail store. Kindmart’s managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs Kindmart $2,000,000 per month and $55 per order. Kindmart has two options, a partially automated B2B and a fully automated B2B system. The partially automated B2B system will have a fixed cost of $6,000,000 per month and a variable cost of $45 per order. The fully automated B2B system has a fixed cost of $14,000,000 per month and a variable cost of $25 per order. Based on data from the past two years, Kindmart has determined the following distribution on monthly orders: Monthly Number of Orders Probability 300,000 0.25 500,000 0.45 700,000 0.30 Q2. What is the expected cost of each plan?
Kindmart is an international retail store. Kindmart’s managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs Kindmart $2,000,000 per month and $55 per order. Kindmart has two options, a partially automated B2B and a fully automated B2B system. The partially automated B2B system will have a fixed cost of $6,000,000 per month and a variable cost of $45 per order. The fully automated B2B system has a fixed cost of $14,000,000 per month and a variable cost of $25 per order. Based on data from the past two years, Kindmart has determined the following distribution on monthly orders: Monthly Number of Orders Probability 300,000 0.25 500,000 0.45 700,000 0.30 Q1. Prepare a table showing the cost of each plan for each quantity of monthly orders.
You are the manager of Synlait. Your accountant has indicated that one of the milking machines worth $1m needs to be replaced. You as the manager are required to agree to and sign off the purchase of a replacement machine priced at $25m. Before you make the decision, you need to understand the impact of the purchase and its financing on the financial statements. The milking machine will be financed by paying 20% in cash and the balance as a signed note agreeing to pay the balance at the end of the year. Interest of 5% p.a. will start accruing in the month following the purchase. The old machine will be sold for cash of $1m. Indicate, using the accounting equation, the impact of this transaction on the Balance Sheet and Income Statement. That is, the impact of the sale of the old machine, the purchase of the replacement machine and the first month of interest, but you can ignore depreciation.
A large automobile repair shop installs about 1,250 mufflers per year, 18 percentof which are for imported cars. All the imported-car mufflers are purchased froma single local supplier at a cost of $18.50 each. The shop uses a holding cost basedon a 25 percent annual interest rate. The setup cost for placing an order is estimated to be $28.a. Determine the optimal number of imported-car mufflers the shop should purchase each time an order is placed, and the time between placement of orders.b. If the replenishment lead time is six weeks, what is the reorder point based onthe level of on-hand inventory?c. The current reorder policy is to buy imported-car mufflers only once a year.What are the additional holding and setup costs incurred by this policy?
Blake Corporation has $200,000 in accounts receivable that will be collected within 80 days. Since Blake needs cash immediately, it has decided to factor them and has received $185,000. Everest Factoring Company, which took the receivables, could collect only $195,000 after 100 days. Find the rate of return on this investment for Everest.
Buccaneer, Inc., has determined that it needs $10 million in cash per week. If Buccaneer needs additional cash, it can sell marketable securities, incurring a fee of $100 for each transaction. If Buccaneer leaves funds in its marketable securities, it expects to earn approximately 0.2% per week on their investment. Calculate for the cash infusion of 2 million or 3 million then solve for Transaction Cost and Holding Cost.
Crane, Inc., sells two types of water pitchers, plastic and glass. Plastic pitchers cost the company $30 and are sold for $40. Glass pitchers cost $26 and are sold for $47. All other costs are fixed at $280,800 per year. Current sales plans call for 14,000 plastic pitchers and 28,000 glass pitchers to be sold in the coming year. Crane, Inc., has just received a sales catalog from a new supplier that is offering plastic pitchers for $28. What would be the new contribution margin per unit if managers switched to the new supplier? What would be the new breakeven point if managers switched to the new supplier? (Use contribution margin per unit to calculate breakeven units. Round answers to 0 decimal places, e.g. 25,000.)

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