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Time left 0:55:18. Manning Alternatives currently sells to its customers on terms of 2/10, net 30. Its average collection period is percent currently taking
Time left 0:55:18. Manning Alternatives currently sells to its customers on terms of 2/10, net 30. Its average collection period is percent currently taking the discount. All sales are credit sales. Upper management has expressed concern about sluggish sales, and the marketing department would like a more attractive credit package. Next year's sales are projected to be $2,660,000. It has been estimated that with terms of 3/10, net 60, sales next year would jump to $3,620,000 and 65 percent of sales would take the discount, but the average collection period would increase to 31 days. Manning's contribution margin of 5 percent would hold with the expansion of sales, as would its short-term financing cost of 11 percent. If Manning Alternatives initiate the change in credit policy: The incremental change contribution margin is: O$48,000 O$25,000 O($25,000) O$30,000 The incremental change in discount expense is: O($25,370) O$28,380 O($27,900) O$30,100 The incremental change in opportunity cost on investment in accounts receivable at 11% is: O($22,597) O$25,000 O$22,597 O$27,000
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