SOLVED

11) What does the materials requirement planning (MRP) system start with to determine inventory requirements? A) Production scheduling. B) Current inventory levels. C) Projected budgetary allocation. D) Sales forecasts. E) Shipping rates and schedules. 12) Which of the following typically applies to Just-in-Time (J-I-T) systems? A) Inventory holding costs are carried by the supplier instead of the manufacturer. B) Increased inventory management costs are reflected in higher prices to the consumer. C) Cost of ordering inventory is carried by the supplier and inventory holding costs are carried by the manufacturer. D) Total inventory costs are carried by the supplier. E) Total inventory costs are divided among the logistics carrier, the supplier and the manufacturer. 13) Of the five C’s of credit, what is considered when attempting to determine a business’s capacity to borrow? A) The general state of the economy and the industry in which the customer operates B) The demonstrated integrity of the business’ owner or its board of directors C) The likelihood of the business’s future profitability and liquidity D) The willingness of the business to pay amounts owning as evidenced by the payment record E) The amount of credit requested relative to the customer’s total financial resources 14) Miralonge Manufacturing Ltd. has a net profit of $5.3 million on sales for the year of $43.8 million. The cost of goods sold is 40% of revenue and fixed costs totalled $21 million. The company’s collection period is 35 days and average inventory turnover period is 75 days. Miralonge has added a new product to its line that is expected to increase sales revenue by 15%. The company’s cost of capital is 8% and its ratios of cost of goods to sales, average collection period and average inventory turnover period will stay the same. Fixed costs will remain unchanged. What will be the net increase to profit, including the costs associated with expanding working capital, from the addition to the product line? A) $2.75 million B) $3.85 million C) $3.94 million D) $6.57 million E) $9.22 million 15) Magdalene Pottery and Gifts has annual sales revenue of $1,596,875, of which 80% are on credit, and accounts receivable of $143,500. What is the company’s average collection period for receivables in days? A) 9 B) 12 C) 30 D) 33 E) 41 16) Sales intelligence indicates that an increase in the company’s average collection period from 32 days to 42 days will increase annual sales revenue by 12% from $9,855,000. All sales are on credit. The company’s cost of capital is 9%, its cost of goods sold is 60% of revenue and fixed costs are $2,463,000. After consideration for incremental financing costs, how much of an increase in net profit would the company would achieve? A) $9,331 B) $49,434 C) $102,680 D) $436,493 E) $463,709 17) A company’s accounts payable total $360,960. If the company takes 60 days to pay its outstanding accounts, what is the value of the company’s annual credit purchases? A) $2,195,840 B) $2,165,700 C) $6,016,000 D) $21,958,400 E) $21,657,600 18) Harrison Grocers Ltd., an important customer of J&P Meat Packers, has been paying its invoices in 120 days. If Harrison has a cost of capital of 9.2%, what is the minimum discount level can J&P offer the company to encourage cash on deliver, in other words, immediate cash payment? A) 2.3% B) 3.0% C) 5.4% D) 7.5% E) 9.2% 19) Les Muebles Martineau is considering a credit application from Modulaire Ltee, a well established retailer whose $456,250 worth of purchases from Martineau are expected to provide Martineau with annual EBIT of $56,600 for three years. Modulaire Ltee spreads its orders evenly and would like to be invoiced quarterly with 30 days to pay, resulting in a payment period of 120 days. Martineau has a cost of capital of 9%, and views credit as a capital investment. Factoring in the credit terms, what should be done with Modulaire’s application? A) Turn it down as the result is a net annual loss of $94,000. B) Approve it as the result is a net annual gain of $10,260. C) Turn it down as the NPV is ($6,728). D) Approve it as the sales will provide an IRR of 12.4%. E) Approve it as the NPV is $87,272. 20) Pomico Inc. has $350,000 of receivables on its books as of July 31st, 20% over the month’s budget. To assist in determining whether this is due to an increase in credit sales in the month, one or two larger accounts lagging in payment, or a problem with all collections, what should the manager do? A) Update and analyze the cash flow statement. B) Calculate the average collection period for receivables. C) Review the payments of companies granted credit in July. D) Create a report on the pattern of credit sale cash receipts. E) Produce an aging schedule of receivables.