Exam 20: Credit and Inventory Management

Cohen Industrial Products uses 2,100 switch assemblies per week and then reorders another 2,100.The relevant carrying cost per switch assembly is $18,and the fixed order cost is $300.What is the EOQ?

Which one of the following inventory items is probably the most liquid?

When credit policy is at the optimal point,the:

Under your current cash sales only policy you sell 132 units a month for a total sales value of $9,900.Your variable cost per unit is $44 and your monthly interest rate is 1 percent.Based on a recent survey,you believe that you can sell an additional 25 units per month if you offer a net 30 credit policy.What is the net present value of the proposed switch using the accounts receivable approach?

Your current sales consist of 45 units per month at a price of $390 a unit.You are weighing the pros and cons of switching to a net 30 credit policy from your current cash only policy.If you decide to switch your credit policy you also plan to increase the sales price to $410 a unit.The monthly interest rate is 1.4 percent.What is the break-even default rate of the proposed switch?

You are trying to attract new customers that you feel could become repeat customers.The average price of your product is $619 per unit with a $435 variable cost per unit.The monthly interest rate is 1.8 percent.Your experience tells you that 9 percent of these customers will never pay their bill.Should you offer credit terms of net 30 to attract these potential customers? Why or why not?

The Winter Store just purchased $48,300 of goods from its supplier with credit terms of 2/10,net 25.What is the discounted price?

Weisbrough United currently has a cash sales only policy.Under this policy,the firm sells 410 units a month at a price of $219 a unit.The variable cost per unit is $140 and the carrying cost per unit is $3.30.The monthly interest rate is 1.3 percent.The firm believes it can increase its sales to 475 units a month if it institutes a net 30 credit policy.What is the net present value of the switch using the one-shot approach?

Currently,The Toy Box sells 465 units a month at an average price of $42 a unit.The company thinks it can increase sales by an additional 130 units a month if it switches to a net 30 credit policy.The monthly interest rate is 0.4 percent and the variable cost per unit is $21.What is the incremental cash inflow of the proposed credit policy switch?

Each year you sell 950 units of a product at a price of $899 each.The variable cost per unit is $575 and the carrying cost per unit is $16.90.You have been buying 100 units at a time.Your fixed cost of ordering is $60.What is the economic order quantity?

A just-in-time inventory system: I.when implemented properly reduces the cost of inventory to zero. II.increases the inventory turnover rate. III.is sufficient to handle immediate production needs. IV.minimizes the costs of holding inventory.

Which one of the following statements is correct?

Which one of the following time periods is included in the accounts receivable period but not in the cash collection period?

What is the primary purpose of credit analysis?

Which one of the following statements is correct in regards to credit periods?

The basic factors to be evaluated in the credit evaluation process,the five Cs of credit,are:

Roger's Home Appliances offers credit to customers it deems worthy of this privilege.To determine if a customer is worthy,the firm computes a numerical value which is used to estimate the probability that the customer will default if credit is granted to them.The process of computing this numerical value is referred to as:

Phil's Print Shop grants its customers the right to pay for their print jobs within 30 days of the date of service.This 30-day period is referred to as the:

Which one of the following statements is correct?

A firm offers terms of 2/9,net 41.What effective annual interest rate does the firm earn when a customer does not take the discount?