Ripley Shirt Company sells on credit and manages its own receivables. Average experience for the past three years has been as follows:

John Ripley, the owner, is considering whether to accept credit cards (VISA, MasterCard), Ripley expects total sales to increase by \(10 \%\) but cash sales to remain unchanged. If Ripley switches to credit cards, the business can save \(\$ 8,000\) on other expenses, but VISA and MasterCard charge \(2 \%\) on credit card sales. Ripley figures that the increase in sales will be due to the increased volume of credit card sales

{Requirement}
Should Ripley Shirt Company start accepting credit cards? Show the computations of net income under the present plan and under the credit card plan.

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Cash Credit Total Sales. $300,000 $300,000 $600,000 Cast of goods sold 165,000 165,000 330,000 Bad debt expense... - 10,000 10,000 Other expenses...... 84,000 84,000 168,000