**Need break even qty for new credit policy** The Harrington Corporation is cons
ID: 2638975 • Letter: #
Question
**Need break even qty for new credit policy**
The Harrington Corporation is considering a change in its cash-only policy. The new terms would be net one period. Based on the following information, determine if Harrington should proceed or not. The required return is 2.5 percent per period.
Current Policy
New Policy
Price per unit
$ 86.00
$ 88.00
Cost per unit
$ 47.00
$ 47.00
Unit sales per month
3510
3620
New= (88-47) 3620 = $148,420
Old= (86-47)3510 =$136,890.
Yes, proceed with the change because it will get more margins.
Current Policy
New Policy
Price per unit
$ 86.00
$ 88.00
Cost per unit
$ 47.00
$ 47.00
Unit sales per month
3510
3620
Explanation / Answer
BEQ= FC/P-VC
FC= Fixed Costs =47*3620
P= Price Charged per unit
VC= Variable Costs of production
=$170,140/47-0
=1933.41 rounded to 1933
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