Tom's Toys Is Currently Experiencing a Bad Debt Ratio of 6

question 3

Multiple Choice

Tom's Toys is currently experiencing a bad debt ratio of 6%. Tom is convinced that, with tighter credit controls, he can reduce this ratio to 2%; however, he expects sales to drop by 8% as a result. The cost of goods sold is 75% of the selling price. Per $100 of current sales, what
Is Tom's expected profit under the proposed credit standards?

• A) $15.2
• B) $23.0
• C) $19.0
• D) $21.2

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Definitions:

Withholdings

Amounts of money withheld from an employee's paycheck for taxes, health insurance, retirement savings, etc., and paid directly to the government or other entities.

Payroll Reporting

The process of compiling and submitting employee payroll data, including wages, salaries, and tax withholdings, to relevant authorities or organizations.

Processing Payroll

The administrative task of calculating and distributing wages, as well as filing the necessary taxes.

FUTA

The Federal Unemployment Tax Act, which imposes a payroll tax on businesses to fund state workforce agencies.