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As per HOMEWORKLIB POLICY, I have provided all answer of Question 7 -22 . Please check line by line , Please see logic of below answer . Any doubt , please drop me message . I will support you accordingly
Answer of Q 7-23- I will provide answer shortly
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Comiskey Fence Co | Amnt ($) | ||||||
Customer provides additional credit sales | 1,62,000 | ||||||
Un collectable amount would be | 11% | ||||||
Company will do additional expenses | 16,100 | ||||||
Production and Marketing expenses represents % of sales |
70% | ||||||
The company have receivable Turnover ( in Times ) | 5 | ||||||
a-1 | Company having desired rate of return | 17% | |||||
Customer provides additional credit sales | 1,62,000 | ||||||
Less - Un collectable amount (11%*$162000) | 17,820 | ||||||
Net Revenue -A | 1,44,180 | ||||||
Less cost to collect receivable -B | -16,100 | ||||||
Less -
Production and Marketing cost 70% of revenue $ 162000- C |
1,13,400 | ||||||
Incremental Income Before Tax(A-B-C) | 46,880 | ||||||
a-2 | Calculate return in " Incremental Investment" | ||||||
On the basis of " Receivable Turnover" | 5 | ||||||
Incremental Account receivable | |||||||
Customer provides additonal credit sales -A | 1,62,000 | ||||||
The company have receivable Turnover ( in Times )-- B | 5 | ||||||
Incremental Account receivable (A/B) | 32,400 | ($162000/5) | |||||
Incremental Income Before Tax=as above | 46,880 | ||||||
Calculate return in " Incremental Investment" | 145% | ($46880/$32400) | |||||
a-3 | Yes -- company should extend credit to customer because as desired rate of retunrn - 17% , where we have | ||||||
seen 145% return ,, much higher than desired return | |||||||
b-1 | Customer provides additional credit sales | 1,62,000 | |||||
Less - Un collectable amount (14%*$162000) | 22,680 | ||||||
Net Revenue -A | 1,39,320 | ||||||
Less cost to collect receivable -B | -46,880 | ||||||
Less -
Production and Marketing cost 70% of revenue $ 162000- C |
1,13,400 | ||||||
Incremental Income Before Tax(A-B-C) | 72,800 | ||||||
b-2 | Calculate return in " Incremental Investment" | ||||||
On the basis of " Receivable Turnover" | 5 | ||||||
Incrementa Account receiavble | |||||||
Customer provides additonal credit sales -A | 1,62,000 | ||||||
The company have receivable Turnover ( in Times )-- B | 5 | ||||||
Incrementa Account receiavble (A/B) | 32,400 | ($162000/5) | |||||
Incremental Income Before Tax(as above) | 72,800 | ||||||
Calculate return in " Incremental Investment" | 225% | ($72800/$32400) | |||||
b-3 | Yes -- company should extend credit to custimer becuase as desired rate of return - 17% , where we have | ||||||
seen 225% return ,, much higher than desired return |
Comiskey Fence Co | Amnt ($) | ||||||
Customer provides additional credit sales | 1,62,000 | ||||||
Uncollectable amount would be | 11% | ||||||
Company will do additional expenses | 16,100 | ||||||
Production and Marketing expenses represents % of sales |
70% | ||||||
The company have receivable Turnover ( in Times ) | 16 | ||||||
c-1 | Company having desired rate of return | 17% | |||||
Customer provides additional credit sales | 1,62,000 | ||||||
Less - Uncollectable amount (11%*$162000) | 17,820 | ||||||
Net Revenue -A | 1,44,180 | ||||||
Less cost to collect receivable -B | -16,100 | ||||||
Less -
Production and Marketing cost 70% of revenue $ 162000- C |
1,13,400 | ||||||
Incremental Income Before Tax(A-B-C) | 46,880 | ||||||
c-2 | Calculate return in " Incremental Investment" | ||||||
On the basis of " Receivable Turnover" | 1.6 | ||||||
Incremental Account receivable | |||||||
Customer provides additional credit sales -A | 1,62,000 | ||||||
The company have receivable Turnover ( in Times )-- B | 1.6 | ||||||
Incremental Account receivable (A/B) | 1,01,250 | ($162000/1.6) | |||||
Incremental Income Before Tax=as above | 46,880 | ||||||
Calculate return in " Incremental Investment" | 46% | ($46880/$101250) | |||||
c-3 | Yes -- company should extend credit to customer because as desired rate of return - 17% , where we have | ||||||
seen 46% return ,, much higher than desired return |
Problem 7-22 Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although...
Problem 7-22 Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $216,000 In additional credit sales, 14 percent are likely to be uncollectible. The company will incur $16,400 in additional collection expenses. Production and marketing expenses represent 72 percent of sales. The company has a receivables turnover of five times. No other asset buildup will be required to service the new customers. The firm has a 16 percent desired return on...
Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $468,000 in additional credit sales, 11 percent are likely to be uncollectible. The company will incur $17,700 in additional collection expenses Production and marketing expenses represent 76 percent of sales. The company has a receivables turnover of five times. No other asset buildup will be required to service the new customers. The firm has a 17 percent desired return on investment 6-1....
Comiskey Fence Co. is evaluating extending credit to a new group of customers. Although these customers will provide $180,000 in additional credit sales, 12 percent are likely to be uncollectible. The company will incur $16,200 in additional collection expenses. Production and marketing expenses represent 72 percent of sales. The company has a receivables turnover of four times. No other asset buildup will be required to service the new customers. The firm has a 20 percent desired return on investment. a-1....
Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $108,000 in additional credit sales, 8 percent are likely to be uncollectible. The company will also incur $15,800 in additional collection expense. Production and marketing costs represent 71 percent of sales. The firm is in a 30 percent tax bracket and has a receivables turnover of four times. No other asset buildup will be required to service the new customers....
Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $234,000 in additional credit sales, 15 percent are likely to be uncollectible. The company will also incur $16,500 in additional collection expense. Production and marketing costs represent 70 percent of sales. The firm is in a 30 percent tax bracket and has a receivables turnover of four times. No other asset buildup will be required to service the new customers....
21. Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $342,000 in additional credit sales, 13 percent are likely to be uncollectible. The company will also incur $17,100 in additional collection expense. Production and marketing costs represent 73 percent of sales. The firm is in a 35 percent tax bracket and has a receivables turnover of five times. No other asset buildup will be required to service the new...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $146,000 if credit is extended to these new customers. Of the new accounts receivable generated, 8 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 72 percent of sales. The firm is in the 10 percent tax bracket. a. Compute the incremental income after taxes. Incremental income after taxes...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $150,000 if credit is extended to these new customers. Of the new accounts receivable generated, 5 percent will prove to be uncollectible. Additional collection costs will be 2 percent of sales, and production and selling costs will be 74 percent of sales. The firm is in the 35 percent tax bracket. a. Compute the incremental income after taxes. Incremental income after taxes...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $150,000 if credit is extended to these new customers. Of the new accounts receivable generated, 5 percent will prove to be uncollectible. Additional collection costs will be 2 percent of sales, and production and selling costs will be 74 percent of sales. The firm is in the 35 percent tax bracket. a. Compute the incremental income after taxes. Incremental income...
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $250,000 if credit is extended to these new customers. Of the new accounts receivable generated, 7 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs ill be 70 percent of sales. The firm is in the 30 percent tax bracket a. Compute the incremental income after taxes. Incremental income after taxes...