2B5U SNUG-FIT, A MAKER OF BOWLING GLOVES, IS INVESTIGATING THE POSSIB...
153.
CSO: 2B5d
LOS: 2B5u
Snug-fit, a maker of bowling gloves, is investigating the possibility of liberalizing its
credit policy. Currently, payment is made on a cash-on-delivery basis. Under a new
program, sales would increase by $80,000. The company has a gross profit margin of
40%. The estimated bad debt loss rate on the incremental sales would be 6%. Ignoring
the cost of money, what would be the return on sales before taxes for the new sales?
a.
34.0%.
b.
36.2%.
c.
40.0%.
d.
42.5%.