Question: Bike n Work Co. is a shop that sells bike groupsets. In selling the product, the shop is applying only all-cash policy. However, due to

Bike n Work Co. is a shop that sells bike groupsets. In selling the product, the shop is applying only all-cash policy. However, due to increasingly fierce competition in the industry, the shop is considering of implementing a 30-day credit policy. At the moment, the shop sells 10 units of groupset every month. The current price and the variable cost per unit are IDR 12 million and IDR 8 million, respectively. If Bike n Work does switch to net 30 days on sales, it predicts that the quantity sold may rise by 40% and costs will increase by 25% per unit. Meanwhile, the groupset's price under the new policy will be (10 3)% higher. If the required return is 0.90 percent per month, should Bike n Work determine if the company should proceed or not. Assume new orders for (20 3) bike groupsets have been made by customers requesting credit. Credit is extended for one period. Based on historical experience, payment for about 1 out of every 50 such orders is never collected. Assuming that this is a one-time order, should credit be extended? (Hint: use the predicted price and variable cost if the new policy is applied). What is

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