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Mini-Case Your first major assignment after your recent promotion at Ice Nine involves overseeing the...

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Accounting

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Mini-Case Your first major assignment after your recent promotion at Ice Nine involves overseeing the management of accounts receiv- be able and inventory. The first item that you must attend to in- volves a proposed change in credit policy that would involve relaxing credit terms from the existing terms of 1/50, net 70 to 2/60, net 90 in hopes of securing new sales. The management at Ice Nine does not expect bad debt losses on its current cus- tomers to change under the new credit policy. The following in- formation should aid you in the analysis of this problem. New sales level (all credit) $8,000,000 original sales level (all credit) $7,000,000 Contribution margin 25% Percent bad debt losses on new sales New average collection period 75 days original average collection period 60 days Additional investment in inventory $50,000 Pre-tax required rate of return 15% New percent cash discount 2% Percent of customers taking the new cash discount 50% Original percent cash discount Percent of customers taking the old cash discount 50%

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