Bavarian Brew Credit Terms
Bavarian Brew is producing and selling brewery equipment to microbreweries nationwide. Bavarian is charging $15,000 per unit and all of their sales are on credit. Under the current credit policy Bavarian Brew expects to sell 500 units. The variable costs are $6,000/unit and fixed costs are $1,500,000 per year. The company is thinking about changing their credit terms from net 30 to 3/10 net 30. The effect of this change would be a 5% increase in unit sales, but also an increase in bad debt expenses from 2% to 4% of sales. The company expects 75% of its customers to take advantage of the cash discount. Currently the company has an average collection period of 38 days, 30 days until the customers mail their payments and another 8 days to process the payments once they arrive. Bavarian Brew's opportunity cost of funds invested in accounts receivable is 12%.
-What is Bavarian Brew's average investment in accounts receivables under the new credit policy?
A) $198,488
B) $302,013
C) $215,753
D) $236,407
Correct Answer:
Verified
Q1: Bavarian Brew Credit Terms
Bavarian Brew is producing
Q2: Bavarian Brew Credit Terms
Bavarian Brew is producing
Q4: Bavarian Brew Credit Terms
Bavarian Brew is producing
Q5: Bavarian Brew Credit Terms
Bavarian Brew is producing
Q6: Bavarian Brew Credit Terms
Bavarian Brew is producing
Q7: Bavarian Brew Credit Terms
Bavarian Brew is producing
Q8: Smart Products
Assume a 365 day year.
Smart Products
Q9: Sawtooth Industries
Sawtooth Industries uses an economic order
Q10: Big Thompson Industries (BTI)
Big Thompson Industries (BTI)
Q11: Big Thompson Industries (BTI)
Big Thompson Industries (BTI)
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents