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

Jed Rivers, the owner, is considering whether to accept bankcards (VISA, MasterCard). Rivers expects total sales to increase by 10% but cash sales to remain unchanged. If Rivers switches to bankcards, the business can save $8,000 on other expenses, but VISA and MasterCard charge 3% on bankcard sales. Rivers figures that the increase in sales will be due to the increased volume of bankcard sales.

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

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Cash Credit Total ales... Cost of goods sold. Uncollectible-account expense Other expenses. $250,000 $250,000 $500,000 125,000 125,000 250,000 12,000 82,500 82,500 165,000 12,000