Evaluate the proposed change in credit standards

Assignment Help Accounting Basics

Reference no: EM13123535

Jonah's Boats, Inc. is considering relaxing its credit standards in order to meet a competitor's change in credit policy. As a result of the proposed change, sales during the coming year are expected to increase 15%, from 5,000 boats to 5,750 boats, the average collection period is expected to increase from 35 days to 45 days, and bad debts are expected to increase from 2% to 3%. The average sale price per unit is $1,000 and the variable cost per unit is $850. The firm's required return on investment is 10%.

Evaluate the proposed change in credit standards and make a recommendation to the firm.

Reference no: EM13123535

Questions Cloud

Draw marginal revenue and marginal cost curves : Derive, and show on a table, Sony's total and marginal revenue for all possible output levels. From this, draw Sony's demand, marginal revenue and marginal cost curves

Determining linear function and distance : If it is 300 miles from Chicago to St. Louis in a car traveling a constant speed of 60 mph, how do I write a linear function that expresses the distance to be traveled to reach St. Louis, s, as a function of time, t?

Explain how do small companies that have minimal accounting : From an accountant’s perspective, separation of duties is self-explanatory. Explain how do small companies that have minimal accounting staff deal with this issue? Explain how might you, as owner of a small business, ensure the integrity of your f..

Probability that mean fee for sample of customers is less : We have no idea Regarding the shape of the population distribution. What is the probability that the mean fee for a sample of 30 customers was less than $125?

Evaluate the proposed change in credit standards : Evaluate the proposed change in credit standards and make a recommendation to the firm.

Functions-length and cost : A power Station and a factory are on opposite sides of a river 60m wide. A cable must be run from the power station to the factory. it costs $25 per meter to run a cable in the river and $20 per meter on land.

Initial investment in net working capital : The sausage system will save the firm $256,800 per year in pretax operating costs, and the system requires an initial investment in net working capital of $59,920.

Solve space constrained inventories : Space Constrained Inventories, A grocer has exactly 1,000 square feet available to display and sells 3 kinds of vegetables. The space consumed by each kind of vegetable is proportional to its cost

Explain how much orange recognize for federal tax purposes : In its applicable financial statements, Orange reported $4,000 in 2009, $24,000 in 2010 and $20,000 in 2011 as gross revenues. Explain how much of the $48,000 must Orange recognize for federal tax purposes in 2009, 2010 and 2011

User Account

All Pages