Servers Ltd produces a graphite tennis racquet that has been reasonably successful but sales have remained stable in recent years. Financial data on the racquet are as follows:

Selling Price		$40
Variable cost	$30
Fixed cost apportionment	5	35
Profit		5

Servers Ltd has recently been approached by a large supermarket that wishes to buy 30,000 racquets each year but has demanded four months credit. Servers is concerned that if the demand is accepted, its other customers, who are allowed only one months credit, will make similar demands. The current level of sales is 120,000 racquets each year. If Servers accepts the supermarket order, it will have to hold 10,000 extra racquets in inventory (where inventory is valued at total cost) and accounts payable will increase by $350,000. The business expects a return of 25% on its net capital invested. Assess the acceptability of the supermarkets offer, on the basis that: (a) all customers will receive a credit period of four months (b) only the supermarket will receive a four-month credit period.

Assume inventory costs include $5 fixed cost apportionment (i.e. total = $35/unit)

Assume fixed costs of 120m000 x $5 = $600,000 for both cases.