Village Oaks Men's Store has sold on store credit and managed its own receivables. Av-

(Obj. 2) erage experience for the past three years has been:

Lou Onassis, the owner, is considering whether to accept bank cards (VISA, MasterCard). Typically, the availability of bank cards increases total sales by 10 percent. But VISA and MasterCard charge approximately 1 percent of sales. If Onassis switches to bank cards, he can save \(\$ 2,000\) on accounting and other expenses. He figures that cash customers will continue buying in the same volume regardless of the type of credit the store offers.
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Should Village Oaks Men's Store start selling on bank credit cards? Show the computations of net income under the present plan and under the bank credit-card plan.

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Cash Credit Total Sales $200,000 $150,000 $350,000 Cost of goods sold 120,000 90,000 210,000 Uncollectible-account expense 4,000 4,000 Other expenses 34,000 27,000 61,000