Jungle, Inc., 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. 83 percent per month. (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

Current Policy New Policy

Price per unit $ 210?

Cost per unit $ 158 $ 163

Unit sales per month 1,530 1,570

Break-even price $

Question

Jasper Norton

Business

16 May, 20:54

Jungle, Inc., 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. 83 percent per month. (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

Current Policy New Policy

Price per unit $ 210?

Cost per unit $ 158 $ 163

Unit sales per month 1,530 1,570

Break-even price $

+2

Answers (1)

Know the Answer?

Myla Harrington · Answer 1

The break even price is $215.45

Explanation:

Break even Price = [ (Profit as per existing policy / Units under new policy) + Cost] * (1 + Required Return)

= ({ [ (Selling Price - Cost) * Units sold under under existing policy] / Units under new policy} + Cost) * (1 + Required Return)

= ({ [ ($210 - $158) * 1530] / 1570 } + 163) * (1 + 0.83%)

= ({ [ 52 * 1530] / 1570} + 163) * (1.0083)

= ([79560 / 1570] + 163) * 1.0083

= [ 50.68 + 163] * 1.0083

= 213.68 * 1.0083

= 215.45