Excel Applications for Accounting Principles
4th Edition
ISBN: 9781111581565
Author: Gaylord N. Smith
Publisher: Cengage Learning
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Chapter 21, Problem 5R
The following four suggestions have been made to improve the company’s cash position. Evaluate the effect on
- a. Seek agreement with suppliers to extend the credit period to 30 days. This would mean that all current monthly purchases would be paid for in the following month.
- b. Raise the unit price from $28 to $30. A price increase will reduce unit sales by 10% each month. Unit purchases will also be reduced by 10%.
- c. Put the company’s two salespeople on straight commission. This would reduce fixed marketing and administrative costs to $1,500 per month and raise variable marketing and administrative costs to $7 per unit.
- d. Increase the cash discount from 5% to 10%. It is anticipated that this would increase the percentage of customers paying within the discount period to 85%, and those paying the month after the discount period would drop to 8%. Five percent would pay in the following month and 2% would still be uncollectible.
What are your recommendations for Sweet Pleasures, Inc.? Consider potential impact on profits as well as cash balances.
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Chapter 21 Solutions
Excel Applications for Accounting Principles
Ch. 21 - On January 1, Sweet Pleasures, Inc., begins...Ch. 21 - Open the file CASHBUD from the website for this...Ch. 21 - Can the 10,000 note be repaid on May 1? Explain.Ch. 21 - Prob. 4RCh. 21 - The following four suggestions have been made to...Ch. 21 - Reset cells to their initial values. Sweet...Ch. 21 - Prob. 7R
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