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Category > Business & Finance Posted 20 May 2017 My Price 8.00

The Harrington Corporation is considering

The Harrington Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5 percent per period. Based on the following information, what is the break-even price per unit that should be charged under the new credit policy? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 

 

Current Policy

New Policy

Price per unit

$

104

    

?

  

Cost per unit

$

47

  

$

47

  

Unit sales per month

  

3,240

    

3,400

  

CommentYour answer

    Best Answer
  • AnonymousAnonymous answered this 15 minutes later660 answers• 65% Best Answer
    Let price be X    
    Particulars Current Policy New Policy
    Price per unit 104.00 X
    Cost per unit 47.00 47.00
    Credit cost per unit - 2.5%X
    Unit sales per Month 3,240.00 3,400.00
    Contribution per unit 57.00  
    Contribution 184,680.00  
    Return per period 2.50%  
    (x - 47 -2.5%x)3400 = 184,680    
    .975X - 47)3400=184680    
    .975X-47 = 54.32    
    .975X = 101.32    
    X=103.92    
         
    Particulars Current Policy  
    Price per unit 103.9155  
    Cost per unit 47.00  
    Credit cost per unit 2.60  
    Unit sales per Month 3,400.00  
    Contribution per unit 54.32  
    Contribution 184,679.88  
         
    Price should be 103.92 so that contribution remains same

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Status NEW Posted 20 May 2017 10:05 AM My Price 8.00

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