Directions: Click the case link above and use the information provided in Dealer's Choice, Part A, to answer this question: Which of the following is expected to help increase Dealer's Choice's gross profit margin in 2014? Higher unemployment in the region Cheaper raw materials Higher selling prices Better efficiencies Dealer's Choice Part A Company Information Dealer's Choice manufactures and markets gaming tables and chairs for casinos. Its major lines are poker, blackjack and roulette tables. The company is located in a city known for its casinos and has been in business for over 20 years. Dave and Gina Buller founded the company nearly 15 years ago, and they continue as its owners/managers today June 20Y4). Recently you met the Bullers at a social gathering. After the subject of banking came up, they invited you to visit their plant and offices at your first opportunity. You learn that Dealer's Choice has been a customer of North Country Bank for about five years. The company currently borrows up to a limit of $1.2 million on a line of credit secured by inventory and accounts receivable but is looking for a bank that will offer them a higher limit with better terms. Assume that you are visiting with Dave and Gina at their plant and offices. Gina: Our business continues to grow, and we're nearly at full capacity. Even with a second work shift, we can barely make and deliver enough furniture to meet demand. Last year we did nearly $8 million, an increase of about $500,000 from the prior year. We held our prices last year, and in 2012. Sales grew because of the growing popularity of casino poker and because we expanded our marketing area. This year, we've raised our prices about 15 percent, and we are still experiencing an increase in unit sales. Now we are realizing the benefit of our sales promotion in 2013 as well as the improving economy. As more states relax their gaming restrictions, we know our sales will continue to grow. Dave: In 20Y3, we began to move beyond the 500-mile radius we used to serve, and we now sell to casinos just about anywhere in the country. This has helped us to continue our growth. We deliver our furniture promptly, and we give all our customers excellent service, regardless of their size and location. Gina: That's right. In fact, our delivery charge is never over $150, regardless of the price of the sale, the size of the order, or the customer's location. That's a real selling point with our low-volume customers around the country. Dave: We're looking to increase our line of credit to $1.7 million, and maybe improve the terms also. Our line now is secured by inventory and accounts receivable, and we have to submit a report every time we borrow. We can borrow up to 70 percent of our eligible receivables but only 40 percent of our raw materials inventory, although we keep telling the bank that our timber stock is worth more than that. We've been paying North Country Bank's base rate plus 1 percent on the line and on the small term loan. We also keep all our company deposits with North Country and would move those to you. We need the extra funds to finance the increased accounts receivable and inventory resulting from our growth. The financial statements for Dealer's Choice follow. Directions: Click the case link above and use the information provided in Dealer's Choice, Part A, to answer this question: Which of the following is expected to help increase Dealer's Choice's gross profit margin in 2014? Higher unemployment in the region Cheaper raw materials Higher selling prices Better efficiencies Dealer's Choice Part A Company Information Dealer's Choice manufactures and markets gaming tables and chairs for casinos. Its major lines are poker, blackjack and roulette tables. The company is located in a city known for its casinos and has been in business for over 20 years. Dave and Gina Buller founded the company nearly 15 years ago, and they continue as its owners/managers today June 20Y4). Recently you met the Bullers at a social gathering. After the subject of banking came up, they invited you to visit their plant and offices at your first opportunity. You learn that Dealer's Choice has been a customer of North Country Bank for about five years. The company currently borrows up to a limit of $1.2 million on a line of credit secured by inventory and accounts receivable but is looking for a bank that will offer them a higher limit with better terms. Assume that you are visiting with Dave and Gina at their plant and offices. Gina: Our business continues to grow, and we're nearly at full capacity. Even with a second work shift, we can barely make and deliver enough furniture to meet demand. Last year we did nearly $8 million, an increase of about $500,000 from the prior year. We held our prices last year, and in 2012. Sales grew because of the growing popularity of casino poker and because we expanded our marketing area. This year, we've raised our prices about 15 percent, and we are still experiencing an increase in unit sales. Now we are realizing the benefit of our sales promotion in 2013 as well as the improving economy. As more states relax their gaming restrictions, we know our sales will continue to grow. Dave: In 20Y3, we began to move beyond the 500-mile radius we used to serve, and we now sell to casinos just about anywhere in the country. This has helped us to continue our growth. We deliver our furniture promptly, and we give all our customers excellent service, regardless of their size and location. Gina: That's right. In fact, our delivery charge is never over $150, regardless of the price of the sale, the size of the order, or the customer's location. That's a real selling point with our low-volume customers around the country. Dave: We're looking to increase our line of credit to $1.7 million, and maybe improve the terms also. Our line now is secured by inventory and accounts receivable, and we have to submit a report every time we borrow. We can borrow up to 70 percent of our eligible receivables but only 40 percent of our raw materials inventory, although we keep telling the bank that our timber stock is worth more than that. We've been paying North Country Bank's base rate plus 1 percent on the line and on the small term loan. We also keep all our company deposits with North Country and would move those to you. We need the extra funds to finance the increased accounts receivable and inventory resulting from our growth. The financial statements for Dealer's Choice follow