10-31

What -if Analysis As the management accountant for the Tyson Company you have been asked to construct a financial planning model for collection of accounts receivable and then to perform a what-if analysis in terms of the assumption regarding estimated uncollectible accounts. You are provided with the folioing information:

Collection Pattern for Credit Sales: 75 percent of the company's credit sales are collected in the month of sale, 20 percent in the month following month of sale, and 5 percent are uncollectible. Credit Sales: January 2010, $100,000; February 2010, $120,000; March 2010, $110,000.

1. What is meant by the term what-if analysis? 2. Generate a spreadsheet model regarding estimated bad debts expense under the following assumptions regarding the rate of uncollectible accounts; 1 percent, 3 percent, 5 percent (base case) and 8 percent. Prepare an estimate of bad debts expense for each of three months, January through March, and for the quarter as a whole