1. M Inc. is in the process of establishing its optimal safety stock quantity and has provided you the following data:

Supplier's net invoice priceP2,000

Carrying cost rate5%

No. of orders per year12

Stock out costs per occurrenceP4,300

Probability of stock out:

Safety stockProbability

090%

10060%

20040%

30025%

40010%

Determine the following:

1. Carrying cost per unit of safety stock.
2. Optimal safety stock and its total safety stock quantity cost.
3. Assuming an 80% probability of stock out, what is the optimal safety quantity?

2.Cortana Co. feels that its credit costs are too high. By tightening its credit standards, bad debts will fall from 5% to 2%, but sales will fall from P100,000 to P90,000 per year. The variable cost per unit is 60% of the sales price, and the average investment in receivables is expected to remain unchanged. The effective tax rate is 30%. What is the net benefit or cost because of the tightening of the credit standards?