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Table 15.5 Caren's Canoes Is Considering Relaxing Its Credit Standards to Encourage

question 49

Multiple Choice

Table 15.5
Caren's Canoes is considering relaxing its credit standards to encourage more sales. As a result, sales are expected to increase 15 percent from 300 canoes per year to 345 canoes per year. The average collection period is expected to increase to 40 days from 30 days and bad debts are expected to double the current 1 percent level. The price per canoe is $850, the variable cost per canoe is $650 and the average cost per unit at the 300 unit level is $700. The firm's required return on investment is 20 percent.
-What is the net result of implementing the proposed plan? (See Table 15.5)

Know how to assign costs to inventory and cost of goods sold for different inventory valuation methods.

Understand the basic principles and methods of optimization including integer, nonlinear, and mixed-integer linear optimization models.

Identify and formulate objective functions for optimization problems.

Develop constraints for optimization modeling to reflect real-world limitations.

Definitions:

Necessary Condition

A condition that must be present for an event or situation to occur; without it, the event cannot happen.

Sufficient Condition

A condition that, if satisfied, guarantees the occurrence or validity of another event or condition.

Methods of Agreement and Difference

Scientific research methods used to determine the cause of a phenomenon by examining cases where the phenomenon does and does not occur.

Method of Agreement

A principle in comparative research where common factors of various instances of a phenomenon are identified to determine the cause.