Finance Bracelet Blanks, Inc. (Bb) Generated $43,803,000 Term Paper

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Finance

Bracelet Blanks, Inc. (BB) generated $43,803,000 in sales (all on credit) during 2010. The cost of goods sold was 57% of that total. Accounts receivable totaled $3,240,222, inventory totaled $842,020, and accounts payable totaled $1,826,070.

Revenue 43803000

COGS 24967710

INV 842020

DIO 84050/(24967710/365) = 84050/68404 = 1.23

DSP 324020/(43803000/365) = 3240222/123042 = 26.3

DPO 186070/(24967710/365) = 186070/68405 = 2.7

Calculate BB's current cash conversion cycle.

CCC = DIO + DSO -- DPO CCC 1.23 + 26.3 -- 2.7 = 24.83

BB currently uses 3,000 ingots of aluminum each year to manufacture bracelet blanks. The order cost (including shipping) is $5,000 per order, and carrying costs are $75 per unit per year. Determine the economic order quantity, the amount of safety stock, and the reorder point for aluminum ingots assuming there is a 1-week lead time and the firm would like a safety stock of 3%.

Sqr 2 * 3000 * 5000 / 75 = 362.

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c. In an attempt to boost sales, BB is considering relaxing its credit standards by extending more credit to small firms. BB charges $1.50 per unit. Variable costs are $0.5126 per unit and fixed costs are $10,000,000 per year. The relaxation of credit standards is expected to result in a 3.8% increase in sales (the firm has sufficient excess capacity to handle the increase) as well as an increase of three days in the average collection period. They also expect to bad….....

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