Intercity Commuters Limited (ICL) flies people between Victoria and Vancouver Last year an average $100 flight had a $35 contribution margin and $5 fixed costs per customer Credit sales totalled $2,500,000 with an average collection period of 70 days and $50,000 in bad debts The company maintains a...

Revolving line of credit charge 70365 25 million 10 Bad debts Cost of propose ...

Intercity Commuters Limited (ICL) flies people between Victoria and Vancouver. Last year an average $100 flight had

Question:

Intercity Commuters Limited (ICL) flies people between Victoria and Vancouver. Last year an average $100 flight had a $35 and $5 fixed costs per customer. Credit sales totalled $2,500,000 with an average collection period of 70 days and $50,000 in bad debts. The company maintains a revolving at a 10% interest rate.
ICL is looking at expanding its credit collection efforts by hiring an additional person at an annual salary of $35,000. ICL estimates that bad debts could be reduced by 75% and the average collection period reduced to 30 days. However, the more stringent credit terms would likely reduce sales by 7%.
Required:
Should the business implement the new credit controls? Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes... Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...