Problems $7-26$ and $7-27$ Inventory at Cost Basis

Problem $7-26$

Apollo Data Systems is considering a promotional campaign that will increase annual credit sales by $$484,000.$ The company has a $60\%$ cost of goods sold and will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows:

Accounts receivable$5$x

Inventory $8x$

Plant and equipment $2x$

All $$484,000$ of the sales will be collectible. However, collection costs uill be $2$ percent of sales, and production and selling costs will be $75$ percent of sales. The cost to carry invertory will be $10$ percent of inventory. Amortization expense on plant and equipment will be $4$ percent of plant and equipment. The tax rate is $30$ percent. Inventory is calculated using cost of goods sold and not sales.

a$.$ Compute the investments in accoumts receivable, inventory, and plant and equipment based on the turnover ratios. What is the total value of the investment made?

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