As treasurer of the Universal Bed Corporation, Aristotle Procrustes is worried about his bad debt ratio, which is currently running at 6 percent. He believes that imposing a more stringent credit policy might reduce sales by 5 percent and reduce the bad debt ratio to 4 percent.
If the cost of goods sold is 80 percent of the selling price, should Mr. Procrustes adopt the more stringent policy?© BrainMass Inc. brainmass.com June 3, 2020, 6:30 pm ad1c9bdddf
If one bed has a selling price of $100. This means that Universal Bed Corp would have a gross profit of $20 on that one bed. Let's say in a given month he sells 10 beds. ...
This solution discusses in 135 words why the policy with the higher net profit should be adopted.