Incremental cash inflow from proposed credit policy switch

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Reference no: EM13810524

1. A supplier grants your firm credit terms of 3/10, net 50. What is the effective annual rate of the discount if the firm purchases $1,000 worth of merchandise?

29.04 percent

32.04 percent

35.04 percent

34.74 percent

27.54 percent

2. Cape May Products currently sells 90 units a month at a price of $222 a unit. The firm believes it can increase its sales by an additional 22 units if it switches to a net 30 credit policy. The monthly interest rate is .4 percent and the variable cost per unit is $152. What is the incremental cash inflow from the proposed credit policy switch?

$3,780

$1,540

$2,156

$6,300

$7,840

3. Preston Milled products currently sells a product with a variable cost per unit of $23.25 and a unit selling price of $41.25. At the present time, the firm only sells on a cash basis with monthly sales of 390 units. The monthly interest rate is 1.1 percent. What is the switch break-even point if the firm switched to a net 30 credit policy? Assume the selling price per unit and the variable costs per unit remain constant.

407 units

403 units

405 units

404 units

400 units

Reference no: EM13810524

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