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

Samuel Mormino, the owner, is considering whether to accept bankcards (VISA, MasterCard). Mormino expects total sales to increase by 10% but cash sales to remain unchanged. If Mormino switches to bankcards, the business can save $8,000 on other expenses, but VISA and MasterCard charge 3% on bankcard sales. Mormino 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 Sales.. $250,000 $250,000 $500,000 25,000 125,000 250,000 12,000 12,000 82,500 82500 165,000 Cost of goods sold Uncollectible-account expense. 1