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Problem - Credit Card Sales - A local fast-food store is considering accepting major credit cards in its outlets. Current annual sales are $800,000 per outlet. The company can purchase the equipment needed to handle credit cards and have an additional phone line installed in each outlet for approximately $800 per outlet. The equipment will be an expense in the year it is installed. The employee training time is minimal. The credit card company will charge a fee equal to 1.5% of sales for the use of credit cards. The company is unable to determine by how much, if any, sales will increase and whether cash customers will use a credit card rather than cash. No other fast-food stores in the local area accept credit cards for sales payment.
Required -
1. Assuming that only 5% of existing cash customers will use a credit card, what increase in sales is necessary to pay for the credit card equipment in the first year?
2. What other factors might the company consider in addition to an increase in sales dollars?
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