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%.