Decision to extend credit: working backward to uncollectible rate. Hanrahan Company has credit sales of ($ 250,000)

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Decision to extend credit: working backward to uncollectible rate. Hanrahan Company has credit sales of \(\$ 250,000\) and a gross margin on those sales of 20 percent, with 2 percent of the credit sales uncollectible. If the firm extends credit to a new class of customers, credit sales will increase by \(\$ 20,000\), other expenses will increase by \(\$ 300\), and uncollectibles will be 3 percent of all credit sales. Verify that Hanrahan Company will be \(\$ 600\) better off if it extends credit to the new customers. What percentage of the new credit sales is uncollectible?

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