OB1 Sabres Lid. has determined that product sales are not what they could be because they have unused capacity; as a result, the company is considering adjusting its marketing strategy. At present, all sales to distributots are on a cash basis, but the competion offers credit terms. Similar credt terms for OB1 Sabres have been suggested. Research suggests that sales in the upcorning year would jump from \\( \\$ 4.3 \\) milhon annually to \\( \\$ 5.5 \\) million with credit terms of \\( 2 / 10 \\), net 30 . Furthermore, research estimates that \75 of the customers would take the discount and the remainder would pay on average on the 30 th day Inventory turnover would remain at 15 times a year. Cost of goods sold (variable costs) are 75 percent of gross sales. Bad debts are estimated to be 75 percent of credit sales. Credit department expenses would be \\( \\$ 50,000 \\) per year plus the salary of two individuals at \\( \\$ 35,000 \\) per year each. One of the staff would be reassigned from another division without affecting costs or productivity as that individual is currently redundant in that division. Marketing expenses are 4 percent of gross sales. Bank financing of working captal requirements is at 11 percent. Should OB1 Sabres Lid adopt the proposed policy? Show your calculations Solution Problem 7-33 (LO 4) Instructions Use the key facts below and information from the problem to complete the templates below Complete the income statement before,and after the policy change. OB1 Sabres Lid. has determined that product sales are not what they could be because they have unused capacity; as a result, the company is considering adjusting its marketing strategy. At present, all sales to distributots are on a cash basis, but the competion offers credit terms. Similar credt terms for OB1 Sabres have been suggested. Research suggests that sales in the upcorning year would jump from \\( \\$ 4.3 \\) milhon annually to \\( \\$ 5.5 \\) million with credit terms of \\( 2 / 10 \\), net 30 . Furthermore, research estimates that \75 of the customers would take the discount and the remainder would pay on average on the 30 th day Inventory turnover would remain at 15 times a year. Cost of goods sold (variable costs) are 75 percent of gross sales. Bad debts are estimated to be 75 percent of credit sales. Credit department expenses would be \\( \\$ 50,000 \\) per year plus the salary of two individuals at \\( \\$ 35,000 \\) per year each. One of the staff would be reassigned from another division without affecting costs or productivity as that individual is currently redundant in that division. Marketing expenses are 4 percent of gross sales. Bank financing of working captal requirements is at 11 percent. Should OB1 Sabres Lid adopt the proposed policy? Show your calculations Solution Problem 7-33 (LO 4) Instructions Use the key facts below and information from the problem to complete the templates below Complete the income statement before,and after the policy change
