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  • Additional Profit Contribution From Sales Cost of Marginal Investment in AR

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    Neil Dela Cruz Ammen
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    This document appears to be a student's take-home quiz on working capital management. It contains two problems analyzing inventory policies for a company. Problem 1 compares two policies, Policy A and Policy B, in terms of additional profit from sales, investment required, and net profit from implementing each policy. It determines that Policy B would generate higher profits for the company. Problem 2 calculates the total inventory costs of ordering 500 units once a year versus ordering smaller amounts 4 times a year, finding the 4-times-a-year approach results in lower total costs. The document provides relevant cost figures and calculations to analyze the inventory policies.

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    Working Capital Management

    Original Title

    Working Capital

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    This document appears to be a student's take-home quiz on working capital management. It contains two problems analyzing inventory policies for a company. Problem 1 compares two policies, Policy A and Policy B, in terms of additional profit from sales, investment required, and net profit from implementing each policy. It determines that Policy B would generate higher profits for the company. Problem 2 calculates the total inventory costs of ordering 500 units once a year versus ordering smaller amounts 4 times a year, finding the 4-times-a-year approach results in lower total costs. The document provides relevant cost figures and calculations to analyze the inventory policies.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    17 views2 pages

    Additional Profit Contribution From Sales Cost of Marginal Investment in AR

    Uploaded by

    Neil Dela Cruz Ammen
    This document appears to be a student's take-home quiz on working capital management. It contains two problems analyzing inventory policies for a company. Problem 1 compares two policies, Policy A and Policy B, in terms of additional profit from sales, investment required, and net profit from implementing each policy. It determines that Policy B would generate higher profits for the company. Problem 2 calculates the total inventory costs of ordering 500 units once a year versus ordering smaller amounts 4 times a year, finding the 4-times-a-year approach results in lower total costs. The document provides relevant cost figures and calculations to analyze the inventory policies.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 2

    Neil D.

    Ammen
    MMBM-2

    2007-90001

    BM 222 (Financial Management)


    February 20, 2016
    Take-home Quiz 2: Working Capital Management

    Problem 1:
    POLICY A

    Additional profit contribution from sales


    (New sales x profit margin)

    4,000.00
    10000 x 0.4

    cost of marginal investment in AR

    POLICY B

    6,800.00
    17000 x 0.4

    18,493.15

    31,684.93

    average Investment under proposed plan

    0.6*250000/365*(30
    +15)

    0.6*257000/365*(30
    +45)

    average Investment under present plan

    0.6*240000 /
    (365/30)

    11,835.62

    Marginal Investment in AR
    cost of marginal investment in AR

    Net Profit from implementation of


    propose policy

    11,835.62

    0.6*240000 /
    (365/30)

    6,657.53
    1,331.51

    19,849.32
    3,969.86

    2,668.49

    2,830.14

    Since the goal of every firm is the maximization of its profits, the firm should choose to implement Policy B rather than Policy
    A since the former would allow the company to generate higher profits.
    Problem 2:
    Given:
    Q

    2,500

    bags

    Php
    O 500.00

    Usage per
    year
    Ordering cost

    Php 10.00
    Php
    95.00

    A.
    Ordering cost
    carrying cost
    Total Inventory cost

    once a year
    Php
    500.00
    Php 12,500.00
    Php

    500x(2500/2500)
    10x(2500/2)

    4 times a year
    Php 2,000.00
    Php 3,125.00
    Php 5,125.00

    Holding cost
    Purchase cost

    Neil D. Ammen
    MMBM-2

    2007-90001

    BM 222 (Financial Management)


    February 20, 2016

    13,000.00
    B.
    EOQ=SQRT(2x2500x5000/10)

    500
    units

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