Simon Corporation is evaluating a relaxation of its credit policy. At present. 70 percent of sales...

 

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Simon Corporation is evaluating a relaxation of its credit policy. At present. 70 percent of sales are on credit and there is a gross margin of 20 percent. Additional data are: Current Anticipated Sales $500,000 $640,000 Credit sales $410,000 $520,000 4% of credit sales Collection expenses Collection period 3% of credit sales 72 days 90 days Using 360 days in a year, answer the following questions: (a) What is the change in gross profit associated with the proposal? (b) What is the incremental change in collection expenses? (c) What is the change in average accounts receivable? Simon Corporation is evaluating a relaxation of its credit policy. At present. 70 percent of sales are on credit and there is a gross margin of 20 percent. Additional data are: Current Anticipated Sales $500,000 $640,000 Credit sales $410,000 $520,000 4% of credit sales Collection expenses Collection period 3% of credit sales 72 days 90 days Using 360 days in a year, answer the following questions: (a) What is the change in gross profit associated with the proposal? (b) What is the incremental change in collection expenses? (c) What is the change in average accounts receivable?

Answer rating: 100% (QA)

A Gross margin for current period 20of sales 20of500000100000 Gross m... View the full answer