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Table 15.7 Fizzy Animators, Inc. Currently Makes All Sales on Credit and Credit

question 218

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Table 15.7
Fizzy Animators, Inc. currently makes all sales on credit and offers no cash discount. The firm is considering a 3 percent cash discount for payment within 10 days. The firm's current average collection period is 90 days, sales are 400 films per year, selling price is $25,000 per film, variable cost per film is $18,750, and the average cost per film is $21,000. The firm expects that the change in credit terms will result in a minor increase in sales of 10 films per year, that 75 percent of the sales will take the discount, and the average collection period will drop to 30 days. The firm's bad debt expense is expected to become negligible under the proposed plan. The bad debt expense is currently 0.5 percent of sales. The firm's required return on equal-risk investments is 20 percent. (Assume a 360-day year.)
-What is the firm's marginal profit contribution from sales under the proposed plan of initiating the cash discount? (See Table 15.7)


Definitions:

Phospholipids

A group of lipids essential to all cell membranes for their ability to create lipid bilayers.

Phosphatidate Core

The basic structure of phospholipids, consisting of a glycerol backbone, two fatty acid tails, and a phosphate group, crucial in membrane biology.

Lecithin

A fatty substance found in plant and animal tissues, used as an emulsifier in food products and nutritional supplements.

Lecithin

A fatty substance found in plant and animal tissues, commonly used as an emulsifier in food products.

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