Learning Goal 4
ST15- 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
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Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
- Soru 17 Iris Company is considering lenghtening its credit period from 40 days to 45 days and believes, as a result of this change, its average collection period will increase from 40 days to 45 days. Bad debt expenses are also expected to increase from 1% to 2% of sales. The firm is currently selling 300,000 units but believes as a result of the change, sales will increase to 325,000 units. On 300,000 units, sales revenue is $4,200,000, variable costs total $3,300,000, and fixed costs are $300,000. The firm has a required return on similar-risk investments of 12%. Evaluate this proposed change and make a recommendation to the firm 4 3 AY B I E E % 8 5 B 8 B 21arrow_forwardPlease help with the attachedarrow_forwardff1arrow_forward
- K Hau Lee Furniture, Inc., spends 55% of its sales dollars in the supply chain and finds its current profit of $25,000 inadequate. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Hau would like to improve the profit line to $30,000 so he can obtain the bank's approval for the loan. Sales Cost of material Production costs Fixed cost Profit Current Situation $100,000 $55,000 (55%) $15,000 (15%) $5,000 (5%) $25,000 (25%) a) What percentage improvement is needed in the supply chain strategy for profit to improve to $30,000? What is the cost of material with a $30,000 profit? A decrease of % in material (supply-chain) costs is required to yield a profit of $30,000, for a new material cost of $. (Enter your response for the percentage decrease to one decimal place and enter your response for the new material cost as a whole number.) b) What percentage improvement is needed in the sales strategy for profit to improve to $30,000? What…arrow_forwardEA1. Garrison Boutique, a small novelty store, just spent $4,000 on a new software program that will help in organizing its inventory. Due to the steep learning curve required to use the new software, Garrison must decide between hiring two part-time college students or one full-time employee. Each college student would work 20 hours per week and would earn $15 per hour. The full-time employee would work 40 hours per week and would earn $15 per hour plus the equivalent of $2 per hour in benefits. Employees are given two polo shirts to wear as their uniform. The polo-shirts cost Garrison $10 each. What are the opportunity costs for Garrison?arrow_forwardABC Distributing Company sells small appliances to hardware stores. The President of the Company thinking about changing the credit policies offered by the firm to attract customers away from competitors. The current policy calls for a 1/10, net 30, and the new policy would call for a 3/10, net 50. Currently 40% of the customers are taking the discount, and it is anticipated that this number would go up to 50% with the new discount policy. It is further anticipated that annual sales would increase from a level of $200,000 to $250,000 because of the change in the cash discount policy. The increased sales would also affect the inventory level. The average inventory carried by Company is based on a determination of an EOQ. Assume unit sales of small appliances will increase from 20,000 to 25,000 unit. The ordering cost for each is $100 and the carrying cost is based on EOQ/2. Each unit in inventory has an average cost of $6.50. CoGS is equal to 65% of net sales; general and adm. expenses…arrow_forward
- E-12 At Gems in the Rough, a jewelry company, the engraving department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $56,000 per year, to ease the problem. Using the extra worker, the company will be able to engrave 8,000 more units per year. The selling price per unit is $16. The cost per unit currently is $11.85 as shown: (Refer to attached image) What is the annual financial impact of hiring the extra worker for the bottleneck process?arrow_forwardne Breakeven analysis Barry Carter is considering opening a used-book store. He wants to estimate the number of books he must sell to break even. The books will be sold for $14.49 each, variable operating costs are $9.66 per book, and annual fixed operating costs are $73,100. a. Find the operating breakeven point in number of books. b. Calculate the total operating costs at the breakeven volume found in part (a). c. If Barry estimates that at a minimum he can sell 2,050 books per month, should he go into the business? d. How much EBIT will Barry realize if he sells the minimum 2,050 books per month noted in part (c)? ts a. The operating breakeven point is units. (Round to the nearest integer.) Text a Librai Calculat Cesource Enter your answer in the answer box and then click Check Answer. Study Check Answer 4 parts remaining Clear All ication Tools > Question 11 (0/1) Ouestion 12 (0/1). Ouestion 9 (0/1) Ouestion 10 (0/1) Type here to searcharrow_forwardPls answer the all questions with solutions 4. Precio Jewels Corporation produces quality jewelry items for various retailers. For the coming year, it has estimated it will consume 500 ounces of gold. Its carrying costs for a year are P2 per ounce. No safety stock is maintained. If the EOQ is 100 ounces, what is the cost per order? a. P40 b. P20 c. P5 d. P25 5. A company has estimated its economic order quantity for Part A at 2,400 units for the coming year. If ordering costs are P200 and carrying costs are P0.50 per unit per year, what is the estimated total annual usage? a. 6,000 units b. 28,800 units c. 7,200 units d. 2,400 units 6. A company annually consumes 10,000 units of Part C. The carrying cost of this part is P2 per year and the ordering costs are P100. The company uses an order quantity of 500 units. By how much could the company reduce its total costs if it purchased the economic order quantity instead of 500 units? a. P500 b. P2,000 c. P2,500 d. P0arrow_forward
- [Question 2] Happy Feet buys hiking socks for $6 a pair and sells them for $10. Management budgets monthly fixed costs of $12,000 for sales volumes between 0 and 12,000 pairs. Requirements Consider each of the following questions separately by using the foregoing information each time. Question 1,2,3 were answered in a pervious submission. I only need the answer to question 4 and 5. 4. Happy Feet plans to advertise in hiking magazines. The advertising campaigns will increase total fixed costs by $2,000 per month. Calculate the new breakeven point in units. 5. In addition to selling hiking socks, Happy Feet would like to start selling sports socks. Happy Feet expects to sell one pair of hiking socks for every three pairs of sports socks. Happy Feet will buy the sports socks for $4 a pair and sell them for $8 a pair. Total fixed costs will stay at $12,000 per month. Calculate the breakeven point in units for both hiking socks and sports socks.arrow_forwardReset cells to their initial values. Sweet Pleasures, Inc., is considering undertaking a 1,200 per month advertising campaign to promote Sweet Pleasures chocolate as exclusive and extraordinarily tasty. What price (dollars and cents) would Sweet Pleasures have to charge for each box to be able to pay for the campaign, pay back the 10,000 note, and have 15,000 left over at the end of April? (Try different prices in cell C9.) Sales price ___arrow_forward3arrow_forward
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