Gilmore Electronics had the following data for a recent year: Cash sales $135,000 Credit sales 512,000 Accounts receivable determined to be uncollectible 9,650 The firm's estimated rate for bad debts is 2.85% of credit sales. Conceptual Connection: If Gilmore's estimate of bad debts is correct (2.85% of credit sales) and the gross margin is 20%, by how much did Gilmore's income from operations increase assuming $150,000 of the sales would have been lost if credit sales were not offered?
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.
Gilmore Electronics had the following data for a recent year:
| Cash sales | $135,000 |
| Credit sales | 512,000 |
| Accounts receivable determined to be uncollectible | 9,650 |
The firm's estimated rate for
Conceptual Connection: If Gilmore's estimate of bad debts is correct (2.85% of credit sales) and the gross margin is 20%, by how much did Gilmore's income from operations increase assuming $150,000 of the sales would have been lost if credit sales were not offered?
Companies offer credit sales in order to increase the sales which in turn increases the net income of the company.
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