The Harrington Corporation is considering a change in its cash-only policy. The
ID: 2643980 • Letter: T
Question
The Harrington Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5 percent per period. Based on the following information, what is the break-even price per unit that should be charged under the new credit policy? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Current Policy
New Policy
Price per unit
$
104
?
Cost per unit
$
47
$
47
Unit sales per month
3,240
3,400
The Harrington Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5 percent per period. Based on the following information, what is the break-even price per unit that should be charged under the new credit policy? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Explanation / Answer
Let price be X Particulars Current Policy New Policy Price per unit 104.00 X Cost per unit 47.00 47.00 Credit cost per unit - 2.5%X Unit sales per Month 3,240.00 3,400.00 Contribution per unit 57.00 Contribution 184,680.00 Return per period 2.50% (x - 47 -2.5%x)3400 = 184,680 .975X - 47)3400=184680 .975X-47 = 54.32 .975X = 101.32 X=103.92 Particulars Current Policy Price per unit 103.9155 Cost per unit 47.00 Credit cost per unit 2.60 Unit sales per Month 3,400.00 Contribution per unit 54.32 Contribution 184,679.88 Price should be 103.92 so that contribution remains same
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