Weddings on Demand sell on the account and manages their own receivables. An average experience for the past three years has been as follows: Sales 350,000$ Costs of goods sold 210,000 Bad Debit expense 4000 Other expense 61000 Unhappy with the amount of bad debts expense she has been experiencing, Aledia Sanchez, controller, is considering a major change in the business. Her plan would be to stop selling on account altogether but accept either cash, credit cards, or debit cards from her customers. Her market research indicates that if she does so, her sales will increase by 10% (i.e., from $350,000 to $385,000), of which $200,000 will be credit or debit card sales and the rest will be cash sales. With a 10% increase in sales, there will also be a 10% increase in the Cost of Goods Sold. If she adopts this plan, she will no longer have bad debts expense, but she will have to pay a fee on debit/credit card transactions of 2% of applicable sales. She also believes this plan will allow her to save $5,000 per year in other operating expenses. Should Sanchez start accepting credit cards and debit cards? Show the computations of net income under her present arrangement and under the plan.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Weddings on Demand sell on the
Sales 350,000$
Costs of goods sold 210,000
Bad Debit expense 4000
Other expense 61000
Unhappy with the amount of
Should Sanchez start accepting credit cards and debit cards? Show the computations of net income under her present arrangement and under the plan.
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