Accounts receivable are too high for Branch A in Exhibit 12.16. One sales analyst recommends giving credit and collection responsibilities to the sales force. Sales reps would be provided with delinquency objectives aimed at reducing accounts receivables by 20 percent. Those meeting their objectives would earn an additional 1 percent of sales for commission. Will this work? Another analyst contends that since the sales force has no training in credits and collections, accounts receivable should be excluded from ROAM calculations. Do you agree? What would happen to Branch A’s ROAM if accounts receivable were excluded?

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EXHIBIT 12.16 Analysis of return on assets managed Sales Cost of Goods Sold Gross Margin Less Variable Branch Expenses Salaries Commissions Office expenses Travel and entertainment Branch Contribution to Profit Branch investments Accounts receivable Inventories Earnings as a Percentage of Sales Turnover Branch Percentage Return on Assets Managed Branch A $2,500,000 2,000,000 500,000 (20%) 155,000 25,000 30,000 40,000 250,000 250,000 500,000 750,000 1,250,000 10.0% 2.0 20.0% Branch B $1,500,000 1,275,000 225,000 (15%) 80,000 10,000 20,000 20,000 130,000 95,000 150,000 225,000 375,000 6.3% 4.0 25.2%