Looking at the following tables, evaluate the impact on Bassetts pretax profits of extending full credit to the customers in Credit Risk Group 5. Bassett estimates that its variable production, administrative, and marketing costs (including credit department costs) are approximately 75 percent of total sales; that is, the variable cost ratio is 0.75. Assume that Bassetts pretax required rate of return on inventory investments is 10 percent and that an additional inventory investment of $20,000 is required due to the anticipated sales increase from customers in Credit Risk Group 5. Assume there are 365 days per year. Round your answer to the nearest dollar.

Credit Evaluation Data Compiled by Bassett Furniture Industries
Credit Risk Group			Credit Sales ($)			Average Collection Period (Days)			Bad-Debt Loss Ratio (%)
	1			900,000			20
	2			1,000,000			30			0.7
	3			700,000			50			6
	4			600,000	*		60			10
	5			500,000	*		85			13
*Estimated lost sales due to the fact that no credit is extended to customers in these risk categories

Bassett Furniture Industries Analysis of the Decision to Relax Credit Standards by Extending Full Credit to Customers in Credit Risk Group 4
Step A:	Additional sales				$600,000
	Marginal profitability of additional sales
	=	Profit contribution ratio x Additional sales
	=	0.25 x $600,000				$150,000
Step B:	Additional investment in receivables
	=	Additional average daily sales x Average collection period
	=	x 60
	=	x 60			$98,630
	Cost of the additional investment in receivables
	=	Additional investment in receivables x Required pretax rate of return
	=	$98,630 x 0.1				$9,863
Step C:	Additional bad-debt loss
	=	Bad-debt loss ratio x Additional sales
	=	0.1 x $600,000				$60,000
Step D:	Additional investment in inventory				$140,000
	Cost of the additional investment in inventory
	=	Additional investment in inventory x Required pretax rate of return
	=	$140,000 x 0.1				$14,000
Step E:	Net change in pretax profits
	=	Marginal return - Marginal costs
	=	A - (B + C + D)
	=	$150,000 - ($9,863 + $60,000 + $14,000)				+$66,137

The impact on Bassetts pretax profits: $