Problem $7-21($Algo$)$ Credit policy and return on investment $[$LO$7-4]$

Global Services is considering a promotional campaign that will increase annual credit sales by $$570,000.$ The

company will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each

is as follows:

All $$570,000$ of the sales will be collectible. However, collection costs will be $3$ percent of sales, and production and

selling costs will be $70$ percent of sales. The cost to carry inventory will be $6$ percent of inventory. Depreciation

expense on plant and equipment will be $5$ percent of plant and equipment. The tax rate is $30$ percent.

a$.$ Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover

ratios. Add the three together.

b$.$ Compute the accounts receivable collection costs and production and selling costs and add the two figures

together.

c$.$ Compute the costs of carrying inventory.