![Problem #2 (Problem 20-17 Break-Even Quantity (LO2]) The Snedecker Corporation is considering a change in its cash-only polic](http://img.homeworklib.com/questions/38c84440-1ecf-11ea-af36-03de0682cef7.png?x-oss-process=image/resize,w_560)
Homework Answers
Current policy :
Fixed cost = sales - variable cost
= (4,250 * 85) - (4,250 * 45)
= 361,250 - 191,250
= $170,000.
New policy:
Let x be the break even quantity
Present value of sales = (87/(1+0.025))x
= 84.8780488x
Fixed cost = sales - variable costs
170,000 = 84.8780488x - 45x
x = 170,000/ (84.8780488 - 45)
= 170,000 / 39.8780488
= 4,262.99 or 4,263
Break even quantity for new credit policy is 4,263 units
(approx).
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