Question
In: Finance
Superior Technologies Inc. sells a product at the unit price of $2,000. Its credit sales in...
Superior Technologies Inc. sells a product at the unit price of $2,000. Its credit sales in the 2019 financial year were reported at 500 units. The variable cost per unit is $1,350. The firm is now considering a tightening of credit standards that is expected to result in the following: (1) a 10% decrease in unit sales; (2) a decrease in bad-debts expense from 2.0% to 1.0% of sales; (3) a decrease of $2,000 in collection expenses and (4) a decrease in the accounts receivable period from 60 days to 30 days. TTL’s required rate of return is 15% p.a.
Fill in the blanks A-F below to weigh up the financial costs and benefits of such decision and to determine whether the company should tighten its credit standards or not.
Do not use comma (,) or a dollar sign ($) in your answers. If the change is a positive value (benefit) enter it with a plus sign (+) and if it is a negative value (loss) enter it with a minus sign (-) WITHOUT any space between the number and the minus/plus sign. Example: if the answer is a loss of $10000, enter your answer as -10000.
Additional Profit/loss from ΔSales: $
Benefit/loss from ΔBad_Debts: $
Benefit/loss from ΔCollection_Expenses: +2000
Benefit/loss from ΔA/R: $
Δ Net Profit: $
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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