a The Feldman Company has a gross margin on credit sales of 30 percent. That is, cost of goods sold on account is 70 percent of sales on account. Uncollectible accounts amount to 2 percent of credit sales. If credit is extended to a new class of customers, credit sales will increase by \(\$ 10,000,8\) percent of the new credit sales will be uncollectible, and selling expenses will increase by \(\$ 1,000\). Would Feldman Company be better or worse off if it extends credit to the new class of customers and by how much?

b How would your answer to part a differ if \(\$ 2,000\) of the \(\$ 10,000\) increase in credit sales would have been made anyway as sales for cash? (Assume that the uncollectible amount on new credit sales is \(\$ 800\).)

c The Norman Company has credit sales of \(\$ 100,000\), a gross margin on those sales of 25 percent, and 3 percent of the credit sales are uncollectible. If credit is extended to a new class of customers, sales will increase by \(\$ 40,000\), selling expenses will increase by \(\$ 1,500\), and uncollectibles will be 5 percent of all credit sales. Verify that Norman Company will be \(\$ 4,500\) better off if it extends credit to the new customers. What percentage of the new credit sales are uncollectible?