accounting

Credit Policy Review

The president, vice president, and sales manager of Moorer Corporation were discussing the company’s present credit policy. The sales manager suggested that potential sales were being lost to competitors because of Moorer Corporation’s tight restrictions on granting credit to consumers. He stated that if credit policies were loosened, the current year’s estimated credit sales of $3,000,000 could be increased by a least 20% next year with an increase in uncollectible accounts receivable of only $10,000 over this year’s amount of $37,500. He argued that because the company’s cost of sales is only 25% of revenues, the company would certainly come out ahead.

The vice president, however, suggested that a better alternative to easier credit terms would be to accept consumer credit cards such as VISA or MASTERCARD. She argued that this alternative could increase sales by 40%. The credit card finance charges to Moorer Corporation would be 4% of the additional sales.

At this point, the president interrupted by saying that he wasn’t at all sure that increasing credit sales of any kind was a good thing. In fact, he suggested that the $37,500 of uncollectible accounts receivable was altogether too high. He wondered whether the company should discontinue offering sales on accounts.

With the information given, determine whether Moorer Corporation would be better off under the sales manager proposal or the vice president’s proposal. Also, address the president’s suggestion that credit sales of all types be abolished.

  1. 👍 0
  2. 👎 0
  3. 👁 342

Respond to this Question

First Name

Your Response

Similar Questions

  1. AMERICAN GOVERMENT CCA

    Which of the following represents one of congress's electoral powers? A) the senate elects a president if the house cannot reach a consenus on a candidate B) The house elects a president if no candidate receives a majority of

  2. Social studies

    How did the election of 1796 increase political tentions? A. After the revolution, women demanded an equal voice and vote in politics B. President John Adams and Vice President Thomas Jefferson belonged to different political

  3. AP GOVT

    The 25th amendment describes the sequence of events that would install the vice president as acting president against the will of the president. Outline that sequence of events.

  4. American Government

    3. Which of the following statements about the president's judicial powers are true? Select all that apply. A- The president's amnesty power pardons those who have violated the law. B- The president's can pardon himself from

  1. Social Studies

    Why did political tensions increase after the election of 1796? A. Jefferson lost support from farmers abandoned his ideals B. The elected president and vice president were from opposing parties** C. Adams was out raged he did not

  2. History

    How did John Calhoun react to the Tariff of 1828? A. He used his power as Vice President to influence President Jackson to oppose the tariff. B. He led a charge to impose sticker regulations on the second bank of the United

  3. History

    Which of the following represents how one branch of government checks the other in foreign policy? A:Congress declares war against Iraq. The Pentagon boosts its troop levels. B:The president signs a treaty with Mexico. Congress

  4. government

    2. A whistleblower makes allegations against the vice president. Which of the following actions is Congress NOT empowered to take? a)impeaching the vice president b)investigating the allegations made against the vice president

  1. Executive Branch > Check Answers

    1. Of the three types of independent agencies, which one operates much like a private business? government corporations* 2. Suppose the president were hurt badly, and was unable to inform the Vice President that he could not

  2. history

    1. Which of the following is true of how growth in communication technology has changed the president's relationship with the electorate? (is it c?) a)It has created new ways for the president to deliver constitutionally mandated

  3. American Government

    I need help on my American Government quiz.. Not looking for answers but for someone to see if mine are right, and if not, to help me out. Thanks! 1. When categorizing the Executive Offices of the President, what can you assume

  4. History

    1: Which of the following is true about foreign policy in the United States? A:The goals of foreign policy may change depending on the president, but the methods used are always the same. B:The methods used to enact foreign policy

You can view more similar questions or ask a new question.