Berkeley Prints Expects to Have Sales This Year of $15

question 4

Multiple Choice

Berkeley Prints expects to have sales this year of $15 million under its current credit policy. The present terms are net 30; the days dales outstanding (DSO) is 60 days; and the bad debt loss percentage is 5 percent. Also, Berkeley's cost of capital is 15 percent, and its variable costs total 60 percent of sales. Since Berkeley wants to improve its profitability, a proposal has been made to offer a 2 percent discount for payment within 10 days; that is, change the credit terms to 2/10, net 30. The consultants predict that sales would increase by $500,000, and that 50 percent of all customers would take the discount. The new DSO would be 30 days, and the bad debt loss percentage on all sales would fall to 4 percent.
-What would be the incremental bad debt losses if the change were made?

• A) $130,000
• B) $250,000
• C) -$250,000 (bad debt losses would decline)
• D) -$130,000 (bad debt losses would decline)
• E) $620,000

Understand the concept and applications of social network analysis within organizations.

Recognize the advantages and potential pitfalls of virtual teams in organizational settings.

Differentiate between permanent and temporary work groups within an organization.

Identify and explain the functional silos problem and its impact on organizational effectiveness.

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Definitions:

Compensation System

The method and structure used by organizations to reward their employees, including wages, benefits, bonuses, and incentives.

Job Attitudes

Psychological tendencies expressed by evaluating one's job with some degree of favor or disfavor, encompassing aspects like job satisfaction and organizational commitment.

Compensation Attitudes

Refers to the beliefs and feelings employees have about their pay and how it motivates them.

Return On Equity

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.