A firm plans to make a change that will increase sales from 22,000 vases to 27,000...
A firm plans to make a change that will increase sales from 22,000 vases to 27,000 vases and increase its average collection period from 25 days to 38 days. The price per vase is $400 and the variable cost per unit is $325. The required return on similar-risk investments is 15%.
1.What is the additional profit contribution from sales if the change is made?
2.What is the cost of the marginal investment in accounts receivable for this change?
3.What is the net profit from this change?
4.Should the firm make the change? Explain.
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A firm plans to make a change that will increase sales from
22,000 vases to 27,000...
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Initiating a cash discount Gardner Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 4% cash discount for payment within 15 days. The firm's current average collection period is 60 days, sales are 40,000 units, selling price is $48 per unit, and variable cost per unit is $30. The firm expects that the change in credit terms will result in an increase in sales to 41,000 units, that 70% of the...
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