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As treasurer of the Universal Bed Corporation, Aristotle Procrustes is worried about his bad debt ratio, which is currently running at 5.9%. He believes that
As treasurer of the Universal Bed Corporation, Aristotle Procrustes is worried about his bad debt ratio, which is currently running at 5.9%. He believes that imposing a more stringent credit policy might reduce sales by 5% and reduce the bad debt ratio to 3.9%. Assume current sales are $100.
a. If the cost of goods sold is 81% of the selling price, what is the expected profit on the current credit policy?
b. If the cost of goods sold is 81% of the selling price, what is the expected profit on the more stringent credit policy?
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