E15-4 Forrester Fashions has annual credit sales of 250,000 units with an averag

Question

E15-4 Forrester Fashions has annual credit sales of 250,000 units with an average collection period of 70 days. The company has a per-unit variable cost of $20 and a per-unit sale price of $30. Bad debts currently are 5% of sales. The firm estimates that a proposed relaxation of credit standards would not affect its 70-day average collection period but would increase bad debts to 7.5% of sales, which would increase to 300,000 units per year. Forrester requires a 12% return on investments. Show all necessary calculations required to evaluate Forrester's proposed relaxation of credit standards.

Explanation / Answer

the ans is E15–3 Mama Leone’s Frozen Pizzas uses 50,000 units of cheese per year. Each unit costs $2.50. The ordering cost for the cheese is $250 per order, and its carrying cost is $0.50 per unit per year. Calculate the firm’s economic order quantity (EOQ) for the cheese. Mama Leone’s operates 250 days per year and maintains a minimum inventory level of 2 days’ worth of cheese as a safety stock. If the lead time to receive orders of cheese is 3 days, calculate the reorder point.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.