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Exam 20: Financial Risk Management

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Question 31

Multiple Choice

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The EOQ model is designed to minimize:

A) production costs.
B) inventory obsolescence.
C) the carrying costs of inventory.
D) the costs of replenishing inventory.
E) the total costs of holding inventory.

F) B) and D)
G) None of the above

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Question 32

Multiple Choice

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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 6,500 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) 933 units
D) 1,157 units
E) 1,260 units

F) A) and C)
G) A) and B)

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Question 33

Multiple Choice

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The Cellar Door currently sells 9,620 units a month for total monthly sales of $316,000.The company is considering replacing its current cash only credit policy with a net 30 policy.The variable cost per unit is $15 and the monthly interest rate is 1.5 percent.What is the switch break-even level of sales?

Which one of the five Cs of credit refers to a firm's financial reserves?

If you extend credit for a one-time sale to a new customer you risk an amount equal to:

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 $140 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?

You are doing some comparison shopping.Five stores offer the product you want at basically the same price.Which one of the following stores offers the best credit terms if you plan to forego the discount?

Town Hardware sells goods on credit with payment due 30 days after purchase.If payment is not received by the 30^th day, the store mails a friendly reminder to the customer.If payment is not received by the 45^th day, the store calls the customer and requests payment and also stops offering credit to that customer.These procedures are referred to as the store's:

Inventory needs under a derived-demand inventory system are:

The Green Hornet offers a trade discount with terms of 2/5, EOM.Assume you purchase an item on credit from The Green Hornet on Monday, November 3.What is the invoice date for this purchase?

Which one of the following statements is correct?

Jillian was recently hired by a major retail store.Her job is to determine the probability that individual customers will fail to pay for their charge sales.Jillian's job best relates to which one of the following?

Which two of the following are the key elements in determining whether or not a switch from a no-credit policy to a credit policy is advisable? I.variable cost per unit II.cash discount percentage III.credit price IV.default rate

Which one of the following will increase a firm's investment in accounts receivables?

Which one of the following items is most likely a derived-demand inventory item?

Which one of the following factors tends to favor longer credit periods?

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?

Which one of the following time periods is included in the accounts receivable period but not in the cash collection period?

The Winter Store just purchased $48,300 of goods from its supplier with credit terms of 2/10, net 25.What is the discounted price?

Allison has developed a set of procedures for determining the amount of each raw material that she needs to have in inventory if she is to keep her firm's assembly lines operating efficiently.These procedures are commonly referred to by which one of the following terms?