Bass Boats Inc

question 27

Multiple Choice

Bass Boats 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 Bass 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

---

Definitions:

Ratified

An agreement or decision that has been formally approved and confirmed by the required parties.

Actual Authority

The express and implied powers given by a principal to an agent to enter into contracts or take action on the principal's behalf.

Sales Force

The division of a business responsible for selling its products or services, made up of all its salesperson.

Office Manager

An individual responsible for ensuring the smooth operation of an office, including managing administrative staff and processes.