Table 15.5 Caren's Canoes Is Considering Relaxing Its Credit Standards to Encourage

question 21

Multiple Choice

Table 15.5
Caren's Canoes is considering relaxing its credit standards to encourage more sales. As a result, sales are expected to increase 15 percent from 300 canoes per year to 345 canoes per year. The average collection period is expected to increase to 40 days from 30 days and bad debts are expected to double the current 1 percent level. The price per canoe is $850, the variable cost per canoe is $650 and the average cost per unit at the 300 unit level is $700. The firm's required return on investment is 20 percent. (Assume a 360-day year)
-What is the cost of marginal bad debts under the proposed plan? (See Table 15.5)

• A) $383
• B) $765
• C) $3,315
• D) $5,100

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Definitions:

Carcinoma

A type of cancer that begins in the skin or in tissues that line or cover internal organs.

Ductal

Pertaining to or involving ducts in the body, such as those in the glands, pancreas, or mammary glands.

Leukemias

A group of cancers that affect the blood and bone marrow, characterized by an overproduction of abnormal white blood cells.

Blood-forming Tissues

Refers to the tissues responsible for the production of blood cells, including the bone marrow and lymphatic tissue.