info in images Gomez runs a small pottery firm. He hires one helper at $13,000 per year, pays annual rent of $5,500 for his shop, and spends$21,500 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that couldearn him $5,500 per year if alternatively invested. He has been offered $19,000 per year to work as a potter for a competitor. Heestimates his entrepreneurial talents are worth $2,500 per year. Total annual revenue from pottery sales is $75,000.Instructions: Enter your answers as a whole number.Calculate the accounting profit and the economic profit for Gomez's pottery firm.Accounting profit = $Economic profit = $ You are a newspaper publisher. You are in the middle of a one-year factory rental contract that requires you to pay $500,000 permonth, and you have contractual salary obligations of $1,250,000 per month that you can't get out of. You also have a marginalprinting cost of $0.35 per paper as well as a marginal delivery cost of $0.10 per paper.Instructions: Enter your answers rounded to two decimal places.a. If sales fall by 20 percent from 1,000,000 newspapers per month to 800,000 newspapers per month, what happens to the AFC pernewspaper?AFC per newspaper risesv from $to $b. What happens to the MC per newspaper?MC per newspaper does not changec. What happens to the minimum amount that you must charge to break even?It risesv from $to

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Gomez runs a small pottery firm. He hires one helper at $13,000 per year, pays annual rent of $5,500 for his shop, and spends $21,500 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $5,500 per year if alternatively invested. He has been offered $19,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $2,500 per year. Total annual revenue from pottery sales is $75,000. Instructions: Enter your answers as a whole number. Calculate the accounting profit and the economic profit for Gomez's pottery firm. Accounting profit = $ Economic profit = $

Gomez runs a small pottery firm. He hires one helper at $13,000 per year, pays annual rent of $5,500 for his shop, and spends $21,500 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $5,500 per year if alternatively invested. He has been offered $19,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $2,500 per year. Total annual revenue from pottery sales is $75,000. Instructions: Enter your answers as a whole number. Calculate the accounting profit and the economic profit for Gomez's pottery firm. Accounting profit = $ Economic profit = $

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 9MC: Now assume that it is several years later. The brothers are concerned about the firm’s current...

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Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.
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