Bracelet Blanks Inc Case

Question 1 Operating Cycle and Cash Conversion Cycle for Bracelet Banks Inc. Data 1) Sales 2) Cost of Sales 3) Accounts Payable 4) Accounts Receivable 5) Inventory Time Period (Days) 6) Average age of Inventory (AAI) {(5) /[(2) /365]} 7) Average collection period (ACP) {(4) /[(1) /365]} 8) Average payment period (APP) {(3) /[(2) /365]}d Cycle (Days) 9) Operating Cycle (OC) [(6)+(7)] 10) Cash Conversion Cycle (CCC) [(9)-(8)] Question 2 Economic Order Quantity, Safety Stock, Re-order Point Economic Order Quantity (EOQ)= (2SO/C)1/2 S = Inventory usage per period (typically 1 year) O = Order cost per order C = Carrying Cost per unit per period Safety Stock Quantity = Safety Stock (%) *Inventory Usage per period Re-order point = Lead time in days x Daily Usage Daily Usage = Inventory usage per period/number of days in period Inventory usage per period Order Cost per Order Carrying Cost per unit per period Economic Order Quantity (EOQ) Safety Stock % Safety Stock Quantity Lead Time in days Daily usage Reorder point 3,000 $5,000.00 $75.00 632 3% 90 7 8.22 58

$ $ $ $ $

43,803,000.00 24,967,710.00 1,826,070.00 3,240,222.00 842,020.00

12.31

27.00

26.70

39.31

12.61

Question 3 Relaxing its Credit Standards Price per unit Variable Cost per unit Fixed Costs per year Increase in Sales from relaxation of credit standards Increase in collection period from relaxation of credit standards (dys) Increase in bad debts from relaxation of credit standards Required Return Contribution Margin = (Price - VC) Sales Units = Sales/Price Change in Sales Units from Credit Policies Marginal Profit from increased sales = Change in unit sales x Contribution Margin Total Variable Cost current (TVC current)= Current Sales Units * Variable Cost per unit Total Variable Cost proposed (TVC proposed)= Proposed Sales Units * Variable Cost per unit Turnover of accounts receivable current (TOAR current) = 365/average collection period current (times/year) Average collection period...