Radical Shirt Company sells on credit and manages its own receivables. Average experience for the past three years has been as follows:

Jack Ryan, the owner, is considering whether to accept bankcards (VISA, MasterCard). Ryan expects total sales to increase by 12% but cash sales to remain unchanged. If Ryan switches to bankcards, the business can save $9,000 on other expenses, but VISA and MasterCard charge 2% on bankcard sales. Ryan figures that the increase in sales will be due to the increased volume of bankcard sales.

Requirement
1. Should Radical Shirt Company start selling on bankcards? Show the computations of net income under the present plan and under the bankcardplan.

Transcribed Image Text:

Cash Credit Total Sales.... Cost of goods sold.. Uncollectible account expense.. 192,500 192,500 385,000 18,000 18,000 87,500 87,500 175,000 Other expenses...