User Account

All Pages

Compute the additional annual net income or loss expected

Assignment Help Financial Accounting
Reference no: EM132992403

Nichole Mustard and Credit Karmaare introduced in the chapter's opening feature. Assume that they are considering two options. Plan A. The company would begin selling access to a premium version of its website. The new online customers would use their credit cards. The company has the capability of selling the premium service with no additional investment in hardware or software. Annual credit sales are expected to increase by $250,000.

  • Costs associated with Plan A: Additional wages related to these new sales are $135,500; credit card fees will be 4.75% of sales; and additional recordkeeping costs will be 6% of sales. Premium service sales will reduce advertising revenues by $8,750 annually because some customers will now only use the premium service.
  • Plan B. The company would begin selling merchandise. It would make additional annual credit sales of $500,000. Costs associated with Plan B: Cost of these new sales is $375,000; additional recordkeeping and shipping costs will be 4% of sales; and uncollectible accounts will be 6.2% of sales.

Required

Problem 1: Compute the additional annual net income or loss expected under (a) Plan A and (b) Plan B. Check (1b) Additional net income, $74,000

Problem 2: Should the company pursue either plan? Discuss both the financial and nonfinancial factors relevant to this decision.

Reference no: EM132992403

Questions Cloud

What the entry on march 2020 in the book of first entry be : What the entry on 25 March 2020 in the book of first entry will be? The practice is registered as a VAT vendor. VAT at 15% is included where applicable.
What is Raven net cash flow from financing activities : What is Raven's net cash flow from financing activities? The company uses the direct method. Cash paid for equipment 250,000
What the correct entries in accounting records of sa traders : What the correct entry/entries in the accounting records of SA Traders is? On comparing the cash journals of SA Traders for the month ending 30 April 2020
Determine the consolidated cost of goods sold : On December 31, 2020, the cost of goods sold of Co. X and Co. Y were $120,000 and $80,000, respectively. Determine the consolidated cost of goods sold
Compute the additional annual net income or loss expected : Compute the additional annual net income or loss expected under (a) Plan A and (b) Plan B. Check (1b) Additional net income, $74,000
Discuss sep contributions from employee and employer : Discuss SEP contributions from both the employee and employer perspectives. Discuss advantages and disadvantages to using SIMPLE IRAs
What we have learned about earth environment : Given what we have learned about Earth's environment since this article was published, do you think Friedman's statement that the "sole purpose of business
Determine the amount of the amortization or depletion : Timber rights on a tract of land , Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items.
What is the company market size variance : TV Timers, Inc., manufactures time control devices for TV's. Actual average contribution margin $5.25. What is the company market size variance

Reviews

Write a Review

Financial Accounting Questions & Answers

  Find clarion unlevered cost of capital

Find Clario unlevered cost of capital. Clarion industries has 25 million shares trading at 18$ per share. In addition, Clarion has $150 million in outstanding.

  How much cash was received for services provided

Unearned Revenue had a balance of $1,120 at the end of November and $890 at the end of December. Service Revenue was $4,600 for the month of December. How much cash was received for services provided during December?

  Compute what is the rate of return on the purchase

In the final year, they anticipate being able to sell (salvage) the old equipment for $15,000. What is the rate of return on this purchase?

  What is the year-end balance in accounts receivable

What is the year-end 2018 balance in accounts receivable for Mr. Husker's Tuxedos? (Enter your answers in dollars not in millions. Use 365 days a year.)

  How much will be willing to pay for one share

Giant Co. has just issued preferred, If your required rate of return is 9.11 percent, how much will you be willing to pay for one share of this preferred stock?

  Would have under or outperformed the market

What return would an individual have earned investing in this company's stock? Would they have under or outperformed the market?

  What the ending book value at the end of year would be

Assuming units-of-production depreciation is used the ending book value at the end of year 2 would be closest to? $101,000. / $116,000

  Calculate the cash flow to sales ratio

From the following, calculate the cash flow to sales ratio - Operating income 4,374 Depreciation 1,014

  Compute the current price of the bond

Find the present value of 3 percent * $2,600 (or $78) for 18 years at 12 percent. The $78 is assumed to be an annual payment.

  What is the trial balance total

Which of the following changes will not occur as a result of an entry in the bookkeeping records? What is the Trial Balance total?

  Find what is the ultimate objective of financial management

Find What is the ultimate objective of financial management? to maximize shareholder value (ensure that ROA is higher than the cost of financing)

  How far will such a pion move through the atmosphere

A pion is created in the higher reaches of Earth's atmosphere when an incoming high-energy cosmic-ray particle collides with an atomic nucleus. As measured in a frame fixed with respect to Earth, how far (on the average) will such a pion move throu..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd