Answered step by step
Verified Expert Solution
Link Copied!
Question
1 Approved Answer

plz help below with the unaswered question Apollo Data Systems is considering a promotional campaign that will increase armul credit sales by $700,000. The company

plz help below with the unaswered question image text in transcribed
image text in transcribed
Apollo Data Systems is considering a promotional campaign that will increase armul credit sales by $700,000. The company has a 40% cost of goods sold and will require investments in accounts receivable, inventory, and plant and equipment. The tumover for each is as follows Accounts receivable Inventory Plant and equipment 2x All $708,000 of the sales will be collectible. However, collection costs will be 3 percent of sales, and production and selling costs will be 75 percent of sales. The cost to carry inventory will be percent of inwentory. Amortization expense on plant and equipment will be 5 percent of plant and equipment. The rate is 30 percent. Inventory is calculated using cost of goods sold and not sales a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios What is the total value of the investment made? Accounts receivable Inventory Plant and equipment SHO 6637 $ 354.000 Total Investment 560 b. Compute the accounts receivable collection conts and production and seling costs and add the two figures together. 55/1000 Collection cost Production and selling costs Total costs related to accounts receivable c. Compute the costs of carrying inventory Cost of carrying inventory 5015 d. Compute the amortization expense on new plant and equipment. Amortation expense 1709 c. Compute the costs of carrying inventory Cost of carrying inventory 66375 d. Compute the amortization expense on new plant and equipment Amortization expense 17709 e. Add together all the costs in parts b, cand d Total cost $ 576,577) - Compute income after taxes. Income after taxes $1,995.7 g. If the firm has required return on investment of 15 percent, should it undertake the promotional campaign described throughout this problem? Yes No Problem 7-26 In the previous problem, if inventory had only been 2 times: a. What would be the new value for inventory investment? Inventory investment $ 354,000 b. What would be the return on investment? You need to recompute the total investment and the total costs of the campaign to work toward computing income after taxes. (Round the final answer to 1 decimal places Rate of return 6.2 Should the campaign be undertaken? % Yes O No

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image
Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting An Introduction

Authors: Eddie McLaney, Dr Peter Atrill, Eddie J. Mclan

5th Edition

0273733206, 978-0273733201

More Books

Students explore these related Accounting questions