what other factors should she take into consideration 624449
Sally Stillwagon owns a hardware store; she sells items for cash and on account. During 2009, which seemed to be a typical year, some of her company”s operating data and other data were as follows:
|
Sales: |
|
|
For cash |
$1,200,000 |
|
On credit |
2,200,000 |
|
Cost of obtaining credit reports on customers |
3,600 |
|
Cost incurred in paying a part-time bookkeeper to keep the accounts |
|
|
receivable subsidiary ledger up to date |
12,000 |
|
Cost associated with preparing and mailing invoices to customers and |
|
|
other collection activities |
18,000 |
|
Uncollectible accounts expense |
45,000 |
|
Average outstanding accounts receivable balance (on which |
A national credit card agency has tried to convince Stillwagon that instead of carrying her own accounts receivable, she should accept only the agency”s credit card for sales on credit. The agency would pay her two days after she submits sales charges, deducting 6 percent from the amount and paying her 94 percent.
a. Using the data given, prepare an analysis showing whether or not Stillwagonwould benefit from switching to the credit card method of selling on credit.
b. What other factors should she take into consideration?