NEED A PERFECT PAPER? PLACE YOUR FIRST ORDER AND SAVE 15% USING COUPON:

4.8/5

solution

Arthur Coffee Roasters (ACR) is a coffee roasting company in North Vancouver. The Company accepts cash only and they are considering adopting a change of credit policy. Under the new policy customers would be given 30 days to pay up the full price of their purchases. As a result of this policy, ACR believes they could increase the selling price to $140 per unit (10lbs bag) in 2020 from 2019 selling price of $125. The variable costs of production are $80 per unit. In 2019, ACR sold 15,000 units and expects that 2020 sales will increase by 20% due to the favorable change in the credit policy. Bad debt expense is expected to be 2% of 2020 sales. The after-tax discount rate is 6% and the tax rate is 25%.

a. Should ACR begin extending credit under the terms described above? Show your calculations.

b. Suppose ACR adopted the policy above with success and wish to offer an incentive for early payment. The modified credit policy would be 2/10 net 30 instead of the new policy above. The firm estimates that only 30% of the customers will take advantage of the discount. Should ACR revise the new credit policy? Show your calculations.

Solution:

15% off for this assignment.

Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!

Why US?

100% Confidentiality

Information about customers is confidential and never disclosed to third parties.

Timely Delivery

No missed deadlines – 97% of assignments are completed in time.

Original Writing

We complete all papers from scratch. You can get a plagiarism report.

Money Back

If you are convinced that our writer has not followed your requirements, feel free to ask for a refund.

WeCreativez WhatsApp Support
Our customer support team is here to answer your questions. Ask us anything!