Campbell Computing Inc

question 29

Multiple Choice

Campbell Computing Inc.currently has sales of $1,000,000, and its days sales outstanding is 30 days.The financial manager estimates that offering longer credit terms would (1) increase the days sales outstanding to 50 days and (2) increase sales to $1,200,000.However, bad debt losses, which were 2 percent on the old sales, would amount to 5 percent on the incremental sales only (bad debts on the old sales would stay at 2 percent) .Variable costs are 80 percent of sales, and Campbell has a 15 percent receivables financing cost.What would the annual incremental pre-tax profit be if Bass extended its credit period?

• A) −$20,000
• B) −$10,000
• C) $0
• D) $10,000
• E) $20,000

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Definitions:

Symmetric

Having proportions that are well balanced or proportions that mirror each other on either side of a central axis.

Distribution Shape

The form or appearance of the graphical representation of a dataset, indicating how data is dispersed or spread.

Standard Deviation

A statistic that quantifies the dispersion or spread of a set of numerical data from its mean.

Symmetric

Characterized by or exhibiting symmetry; having identical shape, size, and position on both sides of a dividing line.