Happy Times currently has an all-cash credit policy. It is considering making a

Question

Happy Times currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. Based on the following information, what is the break-even price per unit under the new credit policy? The required return is 0.79 percent per month. (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

Happy Times currently has an all-cash credit policy. It is considering making a change in the credit policy by going to terms of net 30 days. Based on the following information, what is the break-even price per unit under the new credit policy? The required return is 0.79 percent per month. (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Break even price:

Existing profit per unit = New sales price - New sales price * .79% - Variable cost

190 - 146 = X - X*.79% - 150

44 = X - .0079X - 150

X = 195.54

Break even price = 195.54

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