Question content area top Part 1 Shortening the credit period A firm is contemplating shortening its credit period fro
Posted: Mon Apr 25, 2022 8:41 am
Question content area top
Part 1
Shortening the credit period A firm is contemplating
shortening its credit period from
40
to
30
days and believes that, as a result of this change,
its average collection period will decline from
46
to
35
days. Bad-debt expenses are expected to decrease from
1.6%
to
1.1%
of sales. The firm is currently selling
12,200
units but believes that as a result of the
proposed change, sales will decline to
10,100
units. The sale price per unit is
$56,
and the variable cost per unit is
$46.
The firm has a required return on equal-risk investments
of
25.6%.
Evaluate this decision, and make a recommendation to the
firm.
(Note:
Assume a 365-day year.)
Question content area bottom
Part 1
The reduction in profit contribution from a decline in sales
is
$enter your response here.
(Round to the nearest dollar. Enter as a
negative number.)
Part 2
The benefit from the reduced marginal investment in A/R
is
$enter your response here.
(Round to the nearest dollar.)
Part 3
The cost savings from the reduction in bad debts is
$enter your response here.
(Round to the nearest dollar.)
Part 4
The net profit or loss from implementing the proposed plan
is
$enter your response here.
(Round to the nearest dollar. Enter a negative number for
a loss.)
Part 5
Is the proposed plan recommended?
▼
No
Yes
(Select from the drop-down menu.)
Part 1
Shortening the credit period A firm is contemplating
shortening its credit period from
40
to
30
days and believes that, as a result of this change,
its average collection period will decline from
46
to
35
days. Bad-debt expenses are expected to decrease from
1.6%
to
1.1%
of sales. The firm is currently selling
12,200
units but believes that as a result of the
proposed change, sales will decline to
10,100
units. The sale price per unit is
$56,
and the variable cost per unit is
$46.
The firm has a required return on equal-risk investments
of
25.6%.
Evaluate this decision, and make a recommendation to the
firm.
(Note:
Assume a 365-day year.)
Question content area bottom
Part 1
The reduction in profit contribution from a decline in sales
is
$enter your response here.
(Round to the nearest dollar. Enter as a
negative number.)
Part 2
The benefit from the reduced marginal investment in A/R
is
$enter your response here.
(Round to the nearest dollar.)
Part 3
The cost savings from the reduction in bad debts is
$enter your response here.
(Round to the nearest dollar.)
Part 4
The net profit or loss from implementing the proposed plan
is
$enter your response here.
(Round to the nearest dollar. Enter a negative number for
a loss.)
Part 5
Is the proposed plan recommended?
▼
No
Yes
(Select from the drop-down menu.)