| ticular |
Amount in $ |
| The price per carton . |
90 |
| cost per carton is $60 |
60 |
| profit |
30 |
| The unit sales will increase from 1,190 cartons to 1,250 per month if credit is granted. |
| Current sales unit |
1190 |
| New sale |
1250 |
| Increase in sale units |
60 |
| INCremental revenue |
|
|
|
Per unit |
Icrementa for 60 Units |
| Particular |
Amount in $ |
|
| The price per carton . |
90 |
5,400.00 |
| cost per carton is $60 |
60 |
3,600.00 |
| Increase in net profit |
30 |
1,800.00 |
| less : |
|
|
1% cost
1250 *90 *1% |
|
1,125.00 |
| INCremental revenue |
|
675.00 |
If the interest rate is 1.5% per month, what will be the change in the firm’s total monthly profits on a present value basis if credit is offered to all customer
| INCremental revenue |
|
|
|
Per unit |
Icrementa for 60 Units |
| Particular |
Amount in $ |
|
| The price per carton . |
90 |
5,400.00 |
| cost per carton is $60 |
60 |
3,600.00 |
| Increase in net profit |
30 |
1,800.00 |
| less : |
|
|
1% cost
1250 *90 *1.5% |
|
1,687.50 |
| INCremental revenue |
|
112.50 |
C
Assume the interest rate is 1.5% per month but the firm can offer the credit only as a special deal to new customers, while existing customers will continue to pay cash on delivery. What will be the change in the firm’s total monthly profits on a present value basis under these conditions
| INCremental revenue |
|
|
|
Per unit |
Icrementa for 60 Units |
| Particular |
Amount in $ |
|
| The price per carton . |
90 |
5,400.00 |
| cost per carton is $60 |
60 |
3,600.00 |
| Increase in net profit |
30 |
1,800.00 |
| less : |
|
|
1% cost
60 *90 *1.5% |
|
81.00 |
| INCremental revenue |
|
1,719.00 |
