Exam 20: Credit and Inventory Management

Saucier Co. currently sells 1,208 units a month for total monthly sales of $209,600. The firm is considering replacing its current cash only credit policy with a net 30 policy. The variable cost per unit is $106 and the monthly interest rate is .71 percent. What is the new sales quantity at the switch break-even level of sales? Assume the selling price per unit and the variable costs per unit remain constant.

A 2/10, net 30 credit policy:

A particular inventory manager orders items only in quantities that minimize inventory costs. What is this restocking quantity called?

Brown's Hardware offers a discount of two percent on their commercial accounts if payment is received within ten days. Otherwise, payment is due within 30 days. This credit offering is referred to as the:

Lakeside Market sells 848 units of an item priced at $49 each year. The carrying cost per unit is $2.26 and the fixed costs per order are $46. What is the economic order quantity?

Which one of the five Cs of credit refers to a customer's willingness to pay its bills?

When considering a switch from an all-cash credit policy to a net 30 credit policy all of the following should be considered except the:

The period of time that extends from the day a credit sale is made until the day the bank credits the seller's account with the payment for that sale is known as the ________ period.

Which one of the following will increase a firm's investment in accounts receivables?

Roger's Home Appliances offers credit to customers it deems qualified based on a numerical value that estimates the probability that the customer will default if credit is granted to them. The process of computing this numerical value is referred to as:

Which one of the following factors most supports a longer credit period being offered to customers?

The ABC approach to inventory management is based on the concept that:

Which one of the following is a characteristic of a just-in-time inventory system?

High Mountain consistently sells 2,400 pairs of $189 skates annually. The fixed order costs is $56 and the carrying costs are $3.85 a pair. What is the economic order quantity?

On average, CT Motors has daily credit sales of $42,390, an inventory period of 53 days, and a collection period of 26 days. What is the average accounts receivable balance?

One of the best-selling items the Corner Store offers sells for $3.99 a unit with a variable cost per unit of $2.88. The carrying cost per unit is $1.07 and the fixed order cost is $42. What is the economic order quantity assuming the store sells 650 units annually?

You can make a one-time sale if you will grant a new customer 30 days to pay.  This customer wants to purchase an item with a sales price of $499 and a variable cost of $287. You estimate the probability of default at 33 percent. The monthly interest rate is .98 percent. Should you grant credit to this customer? Why or why not?

Weisbrough United currently sells 410 units a month at a price of $249 a unit. The variable cost per unit is $132 and the carrying cost per unit is $3.30. The monthly interest rate is 1.2 percent. The firm believes it can increase its sales to 475 units a month if it switches from its cash only to a net 30 credit policy. What is the present value of the switch using the one-shot approach?

Cohen Industrial Products uses 3,600 switch assemblies per week and then reorders another 3,600 units. The annual carrying cost per switch assembly is $9.74, and the fixed order cost is $78. What is the EOQ?

Which one of the five Cs of credit refers to the general economic situation in the customer's line of business?