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Mat 540 Week 1 P15-6

Satisfactory Essays

Problem P15 - 6
(a) EOQ = √(2 x 800 x $50)/2 = 200 u
(b) Aver. level of inventory = (200 u / 2) + [(800 u x 10) /365] = 121.92 u
(c) Reorder point = [(800 u x 10) / 365] + [(800 u x 5) /365] = 32.88 u
(d) There is Change in the Carrying costs, total inventory cost, reorder point while the Ordering costs and the economic order quantity do not change if the firm does not hold the safety stock.

Problem P15 - 9
(a) Bad debts proposed plan = 60000 × $20 × 0.04 = $48000
Bad debts current plan = 50000 × $20 × 0.02 = $20000
(b) Cost of marginal bad debts = Proposed …show more content…

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Problem P16 - 15
(a) 90 days effective rate = ($1000000 - $978000) / $978000 = 2.25%
So, the effective annual rate (EAR) will be:
EAR = (1 + 0.0225) ^365/90 – 1 = 9.44%
(b) 90 days effective rate = [$1000000 - $978000 + $9612] / ($978000 - $9612) = 3.26% So, the effective annual rate (EAR) will be: EAR = [(1 + 0.0326) ^365/90 – 1] = 13.89%

Problem P16 - 17
(a) Acceptable Accounts Receivable Collateral = A + E + F + G + H = $20000 + $2000 + $12000 + $27000 + $19000 = $80000

(b) Level of acceptable Collateral = $80000 × (1 – 10%) = $80000 × (1 − 0.1) =$80000 × 0.9 = $72000

(c) Amount to be borrowed = $72000 × 75% = $72000 × 0.75 =

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