Mix and Brix Suppliers is contemplating shortening its credit period from 45 to 30 days. Based on
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Mix and Brix Suppliers is contemplating shortening its credit period from 45 to 30 days. Based on an analysis, it is estimated that this change will reduce the average collection period from 50 to 45 days, and the bad debts are expected to decrease from 2% to 1% of sales. Currently, sales are 30,000 units, but it is believed that sales will decline to 26,500 units as a result of the proposed change. The selling price per unit is $35 and variable cost per unit is $29. The firm’s required rate of return is 20%. Should the company shorten its credit period? Explain.
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To determine whether Mix and Brix Suppliers should shorten its credit period from 45 to 30 days we need to conduct a financial analysis that takes int...View the full answer
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Related Book For 
Principles Of Managerial Finance
ISBN: 9781292018201
14th Global Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
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