11. On average, your firm sells $25,800 of items on credit each day. The firm\'s
ID: 2652143 • Letter: 1
Question
11. On average, your firm sells $25,800 of items on credit each day. The firm's average operating cycle is 35 days and it acquires and sells inventory, on average, every 18 days. What is the average accounts receivable balance?
$394,740
$464,400
$438,600
$903,000
$789,480
12. A supplier grants your firm credit terms of 3/10, net 50. What is the effective annual rate of the discount if the firm purchases $1,000 worth of merchandise?
29.04 percent
32.04 percent
35.04 percent
34.74 percent
27.54 percent
13.
Cape May Products currently sells 90 units a month at a price of $222 a unit. The firm believes it can increase its sales by an additional 22 units if it switches to a net 30 credit policy. The monthly interest rate is .4 percent and the variable cost per unit is $152. What is the incremental cash inflow from the proposed credit policy switch?
$3,780
$1,540
$2,156
$6,300
$7,840
14.
Preston Milled products currently sells a product with a variable cost per unit of $23.25 and a unit selling price of $41.25. At the present time, the firm only sells on a cash basis with monthly sales of 390 units. The monthly interest rate is 1.1 percent. What is the switch break-even point if the firm switched to a net 30 credit policy? Assume the selling price per unit and the variable costs per unit remain constant.
407 units
403 units
405 units
404 units
400 units
15.
A firm sells 14,200 units of an item each year. The carrying cost per unit is $.47 and the fixed costs per order are $57. What is the economic order quantity?
1,756 units
1,813 units
1,272 units
1,799 units
1,856 units
Explanation / Answer
Answer:
Calculation of Average accounts receivable balance
Operating Cycle = Days' Sales of Inventory + Days Sales Outstanding
Hence Days Sales Outstanding = Operating Cycle - Days' Sales of Inventory
= 35 -18 = 17 Days
Average accounts receivable balance = Days Sales Outstanding * Sales Per Day
= 17 * 25800 = $438600
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