Jaxx Canoes is considering relaxing its credit standards to encourage more sales. As a result, the company expects sales to increase 15% from 300 canoes per year to 345 canoes per year. The selling price is $850 per canoe and the variable costs are $650 per canoe

The company expects its average collection period will increase from 30 days to 40 days. It estimates that its bad debts will double from its the current level of 1% of sales.

Jaxx Canoes has a required return on investments of similar risk of 15%.

10. What is the expected amount of additional profit from sales under the proposed relaxation of credit standards by Jaxx Canoes?

A. 1,350

B. 9,000

C. 29,250

D. 69,000

11. The average investment in accounts receivable under current conditions is closest to:

A. 15,984

B. 20,902

C. 24,643

D. 32,225

12. The average investment in accounts receivable under proposed conditions is closest to:

A. 15,984

B. 20,902

C. 24,643

D. 32,225

13. The cost of marginal investment in accounts receivable under the proposed plan is closest to:

A. 1,299

B. 1,699

C. 8,659

D. 11,324

14. The cost of marginal bad debts under the proposed plan is closest to:

A. 383

B. 765

C. 3,315

D. 5,100