Bridgewater, Inc. currently sells 4,500 units a month for total monthly sales of $285,000. The company is considering replacing its current cash only credit policy with a net 30 policy. The
Variable cost per unit is $48 and the monthly interest rate is 1.5 percent. What is the switch break-
Even point?

Question

Quizplus · Accepted Answer

The break-even point is calculated by considering the additional costs and benefits of switching to a net 30 policy. The increase in sales must cover the cost of the credit policy, which includes the interest cost on the receivables. The calculation involves finding the point where the additional contribution margin from increased sales equals the interest cost.