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?
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
|
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?
NPV = -$156 + {[1 - 0.10] × [$289/(1 + 0.0175)]} = $99.63
|
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?
NPV = -$3.88 + {0.79 × [$4.99/(1 + 0.015)]} = $0
|
No comments:
Post a Comment