A firm is analyzing a relaxation of credit standards that is expected to increase sales 10 percent. The firm is currently selling 400 units at an average sale price per unit of $575, and the variable cost per unit is $400 at the current sales volume. The average cost per unit is $425. What is […]
Date: September 19th, 2020
When a firm’s credit standards is relaxed ________. A) its sales is expected to decrease with corresponding increase in costs B) its costs is expected to decrease with corresponding decrease in sales C) its costs is expected to increase faster than sales if the standards are not relaxed D) its profit contribution from sales will […]
Date: September 19th, 2020
What is the firm’s additional profit contribution from sales under the proposed relaxation of credit standards? (See Table 14.5) A) $2,250 B) $6,750 C) $9,000 D) $69,000 ANSWER C
Date: September 19th, 2020
What is the cost of marginal investments in accounts receivable under the proposed plan? (See Table 14.5) A) $1,817 B) $1,867 C) $1,733 D) $1,617 ANSWER C
Date: September 19th, 2020
What is the cost of marginal bad debts under the proposed plan? (See Table 14.5) A) $383 B) $765 C) $3,315 D) $5,100 ANSWER C
Date: September 19th, 2020
What is the net result of implementing the proposed plan? (See Table 14.5) A) $3,952 B) $3,869 C) $2,084 D) -$2,084 ANSWER A
Date: September 19th, 2020
A firm is considering relaxing credit standards, which will result in annual sales increasing from $1.5 million to $1. 75 million, the cost of annual sales increasing from $1,000,000 to $1,125,000, and the average collection period increasing from 40 to 55 days. The bad debt loss is expected to increase from 1 percent of sales […]
Date: September 19th, 2020
A firm is considering relaxing credit standards which will result in an increase in annual sales from $3 million to $3. 75 million, a decrease in the cost of annual sales from $2,225,000 to $2,000,000, an increase in additional profit contribution from sales of $10,000, and an increase in the average collection period of 15 […]
Date: September 19th, 2020
Credit Scoring Policy Jia’s Jewelry uses the credit scoring technique to evaluate retail applications. The financial and credit characteristics considered and weights indicating their relative importance in the credit decision are shown above. The firm’s credit standards are to accept all applicants with credit scores of 85 or more, to extend limited credit to applicants […]
Date: September 19th, 2020
Maggie’s Gold Coins, Inc is considering shortening its credit period from 30 days to 20 days and believes, as a result of this change, its average collection period will decrease from 36 days to 30 days. Bad debt expenses are also expected to decrease from 1.2 percent to 0.8 percent of sales. The firm is […]
Date: September 19th, 2020
