Question Details

71. You are considering renting a kiosk in the local mall for a period of three months. Any sale you make will be a one-time sale. There is only a 79 percent chance you will collect payment on a credit sale. The product you want to sell has a variable cost of $3.88 and a sales price of $4.99. The monthly interest rate is 1.5 percent. Should you offer people 30 days to pay? Why or why not? 
A. yes; because the NPV of a credit sale is $0.09.
B. yes; because the NPV of a credit sale is $0.03.
C. no; because the NPV of a credit sale is -$0.08.
D. no; because the NPV of a credit sale is -$0.02.
E. It doesn't matter because the NPV of a credit sale is approximately zero.

72. You are trying to attract new customers that you feel could become repeat customers. The average selling price of your products is $69 each with a $41 per unit variable cost. The monthly interest rate is 1.2 percent. Your experience tells you that 8 percent of these customers will never pay their bill. What is the value of a new customer who does not default on his or her bill? 
A. $1,986
B. $2,333
C. $2,617
D. $4,817
E. $8,867

73. You are trying to attract new customers that you feel could become repeat customers. The average price of your product is $619 per unit with a $435 variable cost per unit. The monthly interest rate is 1.8 percent. Your experience tells you that 9 percent of these customers will never pay their bill. Should you offer credit terms of net 30 to attract these potential customers? Why or why not? 
A. yes; because the NPV of extending credit is $8,867
B. yes; because the NPV of extending credit is $9,787
C. yes; because the NPV of extending credit is $128
D. no; because the NPV of extending credit is -$459
E. It doesn't matter because the NPV of extending credit is zero.

74. A firm sells 4,500 units of an item each year. The carrying cost per unit is $2.15 and the fixed costs per order are $67. What is the economic order quantity? 
A. 374 units
B. 421 units
C. 497 units
D. 530 units
E. 623 units

75. The best-selling pair of roller skates The Teen Store offers sells for $79.99 a pair. The store consistently sells 5,700 pairs of these roller skates every year. The fixed costs to order more skates is $68 and the carrying costs are $1.95 per pair. What is the economic order quantity? 
A. 446 pairs
B. 515 pairs
C. 529 pairs
D. 631 pairs
E. 648 pairs

76. One of the best selling items L.T. Ten offers sells for $9.99 a unit. The variable cost per unit is $6.38 and the carrying cost per unit is $1.12. The firm sells 7,100 of these units each year. The fixed cost to order this item is $75. What is the economic order quantity? 
A. 690 units
B. 747 units
C. 975 units
D. 1,157 units
E. 1,260 units

77. Each year you sell 950 units of a product at a price of $899 each. The variable cost per unit is $575 and the carrying cost per unit is $16.90. You have been buying 100 units at a time. Your fixed cost of ordering is $60. What is the economic order quantity? 
A. 82 units
B. 95 units
C. 105 units
D. 113 units
E. 124 units

78. Weisbrough United currently has a cash sales only policy. Under this policy, the firm sells 410 units a month at a price of $219 a unit. The variable cost per unit is $148 and the carrying cost per unit is $3.30. The monthly interest rate is 1.3 percent. The firm believes it can increase its sales to 475 units a month if it institutes a net 30 credit policy. What is the net present value of the switch using the one-shot approach? 
A. $228,400
B. $255,590
C. $261,470
D. $282,233
E. $285,902

79. Under the current cash sales only policy Blue Bird, Inc., will sell 215 units a month at a price of $469 each. The variable cost per unit is $305 and the monthly interest rate is 1.7 percent. Based on a recent survey, the firm believes it can sell an additional 36 units per month if it offers a net 30 credit policy. What is the net present value of the switch using the one-shot approach? 
A. $212,806
B. $231,543
C. $235,479
D. $248,946
E. $251,118

80. Under your current cash sales only policy you sell 132 units a month for a total sales value of $9,240. Your variable cost per unit is $44 and your monthly interest rate is 1 percent. Based on a recent survey, you believe that you can sell an additional 22 units per month if you offer a net 30 credit policy. What is the net present value of the proposed switch using the accounts receivable approach? 
A. $45,976
B. $46,992
C. $49,081
D. $50,224
E. $53,566

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