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73 Current credit policy Proposed credit policy Cash price $48.00 $48.00 Credit price n/a $50.00 Variable cost $36.00 $36.00 Quantity 120 120 Monthly return 2.00%
73
Current credit policy | Proposed credit policy | |
Cash price | $48.00 | $48.00 |
Credit price | n/a | $50.00 |
Variable cost | $36.00 | $36.00 |
Quantity | 120 | 120 |
Monthly return | 2.00% | 2.00% |
Credit terms | n/a | Net 30 |
% Uncollectable | n/a | 3.00% |
Assume the customer will either pay in 30 days or will default. What is the cost of switching the credit policy?
Multiple Choice
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$4,320
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$5,000
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$5,333
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$5,760
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$6,000
74.
Current credit policy | Proposed credit policy | |
Price | $50 | $50 |
Variable cost | $35 | $35 |
Quantity | 850 | 885 |
Monthly return | 1.0% | 1.0% |
Credit terms | n/a | net 30 |
What is the incremental cash flow per year from switching credit policies?
Multiple Choice
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$415
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$475
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$525
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$1,225
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$1,750
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