A company that currently has an all-cash policy is considering making a change to a credit policy with terms of net 30 days. The required return is 1% per month. The information for each of the policies is provided below.
 

(a) Should the company change to the credit policy? 

	Current Policy	New Policy
Number of Units Sold per month	1,500	1,700
Price per unit	$50	$55
Variable cost per unit	$25	$32

(b) Assuming all other variables remain constant, what is the break-even quantity for the new credit policy? 

 

 

Please answer with step by step solutions and formulas.

Answer rating: 100% (QA)

To determine whether the company should change to the new credit policy and calculate the breakeven quantity for the new policy we need to compare the costs and benefits of each policy a Should the co... View the full answer