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Help Save & Exit Sub TDB Inc, manufactures guitars and sells them to specialty retailers in Canada. Last year the company sold 500 guitars at a price of $380.00 per guitar. The company does not currently extend credit, although it is considering offering new credit terms of net 30 days to all customers. They believe this will provided TDB Inc. with an advantage over their competition, thereby increasing the selling price of their product by $10.00 per unit and increasing sales by 90 units per year. Variable costs are expected to remain at $310.00 per unit and bad debt expense will be $3,000 per year. (Note the wording here. Total Contribution Margin will go up for two reasons. First, there will be a price increase on the existing 500 guitars being sold. Second there will be an additional 90 guitars sold at the new price Perform your analysis on total sales and total contribution margin, not just the new volume of sales) 8.55 TDB Inc. expects that all customers will take advantage of the new terms. (.e. they will all pay TDB Inc. 30 days after a sale is recorded.) So, for the first time in the company's history they will have an accounts receivable balance in current assets. The increase in sales will also mean an increase in the inventory they hold. Inventory is currently sitting at $510,000 and is expected to increase by 20 percent. The firm will finance the additional investment in working capital by using a line of credit (bank loan) which charges 9 percent interest per year. Required: a. Calculate the increase in current assets what will need to be financed. Round a n swers to zero decimal places. Ente al numbers as positive New old Increase Accounts Receivable Se Inventory 510,000 Current Assets $ 510,000 V 2 Next Saved d. Udiculdte une increase in current assets wide will neeuw De Huanceu. (Round all final answers to zero decimal places. Enter all numbers as positive) Help Save 8 Exe New Accounts Receivable Increase $ old $0 Inventory 510,000 Current Assets $ 510,000 204 b. Calculate the impact of changing the credit policy. (Round all final answers to zero decimal places. Enter all numbers as positive.) Increase Sales Variable costs Contribution margin Bad Debts Interest costs on increase in current assets Incremental Change b. Calculate the impact of changing the credit policy. (Round all final answers to zero decimal places. Enter all numbers as positive.) Old 01:57:46 Sales Variable costs Ask Contribution margin Bad Debts Interest costs on increase in current assets Incremental Change c. Would you offer the new credit terms? (Click to select) ha Prev Next >

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