Company X sells on a 1/20, net 90, basis. Customer Y buys goods with an invoice of $4,500.
Microbiotics currently sells all of its frozen dinners cash on delivery but believes it can increase sales by offering supermarkets 1 month of free credit. The price per carton is $80, and the cost per carton is $55. The unit sales will increase from 1,030 cartons to 1,090 per month if credit is granted. Assume all customers pay their bills and take full advantage of any credit period offered
On each nondelinquent sale Cast Iron receives revenues with a present value of $1,280 and incurs costs with a present value of $1,130. Assume there is no possibility of repeat orders and that the probability of successful collection from the customer is p = .97
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 800 payments a day will be made to lock boxes with an average payment size of $2,000