Question: What is the EOQ(economic order quantity) formula and how does it works explain the formula? A company is considering a change of credit policy which

What is the EOQ(economic order quantity) formula and how does it works explain the formula?

A company is considering a change of credit policy which will result in an increase in the average collection period from one to two months.The given credit is for areason to increase in sales each year amounting to 25%of the current sales volume.

Seling price per unit$10

Variable cost per unit$8.50

Current annual sales$2400000

The required rate of return on investments is 20%.Assume that the 25% increase in sales would result in additional inventories of $100000 and additional account payable of $20000.

Advice the company on whether or not to extend the credit period offered to customers if all customerstake the longer credit of two months .Existing customers do not change their payment habits and only new cutomers take a full two months credit?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

for the system shown below, design the complete oc protection using the idmt relays. thus, decide the ct ratios, the plug settings and the tms at all locations. 115 A 1500 A 6000 A 80 A 1000 A 77 A...

YouTube link: EOQ Economic Order Quantity formula and explanation B Downloaded video ( identical to the video above; posted just in case the YouTube video link has an issue ) : The requirements for...

I need help with figuring our the data that goes into yellow highlighted areas on this supply chain project. 4. Calculate the (EOQ) Economic Order Quantity for each item. 5. Calculate the number of...

Answer the following questions: 1. Reese Inc. produces pliers. Each pair of pliers sells for 8.00. Variable costs per unit total 5.60 of which 2.50 is for direct materials and 2.10 is for direct...

1. Reese Inc. produces pliers. Each pair of pliers sells for 8.00. Variable costs per unit total 5.60 of which 2.50 is for direct materials and 2.10 is for direct labor. If total fixed costs are...

Instructions: 1. Write all solution with a pen on a notebook 2. Scan all pages of your solution into one single file and Submit via google classroom only. 2. Your Name and ID number should be written...

The RDC corporation is a manufacturer and seller of electronic testing equipment and sells direct to business and on the internet. Their supply chain, at a high level, is depicted below. Recently...

True/False Indicate whether the sentence or statement is true or false. 1. A forecast is an accurate estimate of future demand 2. Lenders require Pro Forma statements because they want to make sure...

Compartmental Manufacturing Corporation Case provided by the Council of Supply Chain Management Professionals Located in Blacksburg, Virginia, CMC is a regional provider of grain towers/silos for...

financial SUBDOMAINS: 325.4 COMMUNICATING EFFECTIVELY IN ORGANIZATIONS 326.1 MANAGING INTERNAL COST & CONTROLLING FINANCES 326.2 MANAGING CAPITAL & FINANCIAL ASSETS 326.4 MANAGING ENTERPRISE RISK &...

Under Generally Accepted Accounting Principles (US GAAP), when there are no accounting rules for new types of transactions (Select all that apply): A) It is inappropriate to apply existing rules by...

A manufacturer of cat towers wishes to locate a super assembly facility to meet their cat tower assembly needs for the next millennium. Currently, carpet, cylinders, yarn and fasteners are purchased...

Refer to the information for Barnard Company . Conversion cost per unit is Last year, Barnard Company incurred the following costs: Direct materials $ 50,000 Direct labor 20,000 Manufacturing...

The annual demand for an item is 1,700 units. The order cost is $7. Unit cost is $8 and the unit holding cost per year is 18% of the item's value. The order quantity is 125 units. What are the total...