Here is my question re-submitted in printer format. I hope you can read all of t

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Here is my question re-submitted in printer format. I hope you can read all of this version.

*Problem 9-26 Carliss Hyde, Truell, nc.'s vice president of marketing, has received a sales call from a vendor of customer relationship management (CRM) software. The vendor daims that the software and other data her company rovides will enable Truell to target its advertising more appropriately and to identify new markets. The average improvement in sales volume from CRM is 10%, with no increase in advertising costs. software and related services is $1,904,988. Truell depreciates software over five years. The company's current cash-basis income statement, based on sales of 80,400 units, follows. Sales Cost of goods sold (all variable) Gross margin Less operating costs $7,670,000 3,040,000 4,630,000 Selling (50% variable) $1,239,000 Administrative (all fixed)3.074,000 3,000 $ 317,000 Income E] Your answer is incorrect. Try again Calculate the payback period for the software if Truell, Inc., realizes the reported average improvements. (Round answer to 2 decimal places, e.o. 15.25.) Payback period ears 70 ] Your answer is correct. Compare the payback period to the useful life of the software. Is the payback period adequate? Your answer is incorrect. Try again. Calculate the accounting rate of return the software will generate. (Round answer to 2 decimal places, e.g. 15.25%.) rcuning ate retu

Explanation / Answer

Computation of Payback Period Particular Current 10% increase Calculation Sales $7,670,000 $767,000 Less: Cost of goods sold (All variable) $3,040,000 $304,000 Gross margin $4,630,000 $463,000 Less operating costs Selling (50% variable) $1,239,000 $61,950 (1239000*50%*10%) Administrative (all fixed) $3,074,000 Operaing Cash Flow $317,000 $401,050 Cost of Software $1,904,988 Annual Operating Cash Flow $401,050 Payback period 4.75 ($1904988/401050) Packback period is 4.75 Year 2. Yes, since life of software is 5 years while payback period is 4.75years 3. Computation of Accounting Rate of Return Annual Operating Cash Flow $401,050 Annual Amortisation software Cost $380,997.60 Net Accounting Income $20,052 Cost of Software $1,904,988 Accounting Rate of Return 1.05%

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