Your firm currently sells 85 units a month at a price of $400 a unit. You think you can increase your sales by an additional 30 units if you switch to a net 30 credit policy. The monthly interest rate is.5 percent and your variable cost per unit is $280. What is the incremental cash inflow from the proposed credit policy switch?
A) $2,400
B) $3,200
C) $3,600
D) $10,800
E) $12,000

Question

Quizplus · Accepted Answer

The incremental cash inflow is calculated by multiplying the additional units sold (30) by the contribution margin per unit ($400 - $280 = $120), which equals $3,600.

Your Firm Currently Sells 85 Units a Month at a Price