Receivables amount to P150,000. Receivable turnover is 10x and inventory is maintained at a level equal to 15 days’ sales. Selling price per unit is P100 and has gross profit ratio of 40%. A proposal has been made to change the term credit to n/60 to result to an increase in sales volume by one-third or by 5,000 units. Under this proposal, bad debts losses are estimated at 1% to 3% of sales but inventory turnover shall remain the same. Required: (a) How much is the increased accounts receivables? (b) How much is the increased inventory? (c) Compute for the increased operating income
Receivables amount to P150,000. Receivable turnover is 10x and inventory is maintained at a level equal to 15 days’ sales. Selling price per unit is P100 and has gross profit ratio of 40%. A proposal has been made to change the term credit to n/60 to result to an increase in sales volume by one-third or by 5,000 units. Under this proposal, bad debts losses are estimated at 1% to 3% of sales but inventory turnover shall remain the same. Required: (a) How much is the increased accounts receivables? (b) How much is the increased inventory? (c) Compute for the increased operating income
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter21: Supply Chains And Working Capital Management
Section: Chapter Questions
Problem 11P: Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35...
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Receivables amount to P150,000. Receivable turnover is 10x and inventory is maintained at a level equal to 15 days’ sales. Selling price per unit is P100 and has gross profit ratio of 40%. A proposal has been made to change the term credit to n/60 to result to an increase in sales volume by one-third or by 5,000 units. Under this proposal, bad debts losses are estimated at 1% to 3% of sales but inventory turnover shall remain the same. Required: (a) How much is the increased accounts receivables ? (b) How much is the increased inventory? (c) Compute for the increased operating income.
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