Credit Decision Apollo Inc does not currently extend credit to their customers. They manufacture drum sets and sell them to specialty retailers in Canada. Last year the company sold 700 drum sets at a price of $380.00 per drum set. The company is considering offering new credit terms of net 30 days to all customers to drive sales. They believe the competitive advantage this new policy would provide would allow Apollo Inc to increase the selling price of their product by $10.00 per unit and Increasing sales by 90 units per year. Variable costs are expected to remain at $310.00 per unit and bad debt expense will be $5,000 per year. (Note the wording here. Total Contribution Margin will go up for two reasons. First, there will be a price increase on the existing 700 drum sets being sold. Second, there will be an additional 90 drum sets sold at the new price. Perform your analysis on total sales and total contribution margin, not just the change in sales volume.) Apollo Inc expects that all customers will take advantage of the new terms (ie, they will all pay Apollo Inc 30 days after a sale is recorded). So, for the first time in the company's history they will have an accounts receivable balance in current assets and a bad debt expense. The increase in sales will also mean an increase in the inventory they hold. Inventory is currently sitting at $491,000 and is expected to increase by 20 percent. The firm will finance the additional investment in working capital by using a line of credit (bank loan) which charges 10 percent interest per year. Required: A Calculate the increase in current assets and the costs to finance that increase: (enfor all numbers as whole numbers) Description Old Difference anter numbers as Accounts receivable Inventory Current assets New N/A Bank interest costs $ Current assets Bank interest costs Difference B. Calculate the impact of changing the credit policy on contribution margin: Description New Old (enter all numbers as positive) Sales Variable Exp Contribution Margin $ C. Calculate the net impact of changing the credit policy: Impact Description Increase in contribution margin Winter as a positive number) Increase in bad debts ter is a negative cumben Bank interest cost interesa negative number Net change (unter as a negative number the amount is dans thorol D. Would you offer the new credit terms? (Click to select) Credit Decision Apollo Inc does not currently extend credit to their customers. They manufacture drum sets and sell them to specialty retailers in Canada. Last year the company sold 700 drum sets at a price of $380.00 per drum set. The company is considering offering new credit terms of net 30 days to all customers to drive sales. They believe the competitive advantage this new policy would provide would allow Apollo Inc to increase the selling price of their product by $10.00 per unit and Increasing sales by 90 units per year. Variable costs are expected to remain at $310.00 per unit and bad debt expense will be $5,000 per year. (Note the wording here. Total Contribution Margin will go up for two reasons. First, there will be a price increase on the existing 700 drum sets being sold. Second, there will be an additional 90 drum sets sold at the new price. Perform your analysis on total sales and total contribution margin, not just the change in sales volume.) Apollo Inc expects that all customers will take advantage of the new terms (ie, they will all pay Apollo Inc 30 days after a sale is recorded). So, for the first time in the company's history they will have an accounts receivable balance in current assets and a bad debt expense. The increase in sales will also mean an increase in the inventory they hold. Inventory is currently sitting at $491,000 and is expected to increase by 20 percent. The firm will finance the additional investment in working capital by using a line of credit (bank loan) which charges 10 percent interest per year. Required: A Calculate the increase in current assets and the costs to finance that increase: (enfor all numbers as whole numbers) Description Old Difference anter numbers as Accounts receivable Inventory Current assets New N/A Bank interest costs $ Current assets Bank interest costs Difference B. Calculate the impact of changing the credit policy on contribution margin: Description New Old (enter all numbers as positive) Sales Variable Exp Contribution Margin $ C. Calculate the net impact of changing the credit policy: Impact Description Increase in contribution margin Winter as a positive number) Increase in bad debts ter is a negative cumben Bank interest cost interesa negative number Net change (unter as a negative number the amount is dans thorol D. Would you offer the new credit terms? (Click to select)