trader has current sales at Rs Six lakhs per annum and an average collection period of 30 days wants to pursue a more liberal policy to improve sales. The selling price per unit is Rs.3, Average cost per unit is Rs.2.25 and the variable cost per unit is Rs 2. The current bad debt loss is 1%. Required return on additional investment is 20%. Assume as 360 days a year. Calculate net profit for each proposed plans. Which of the above policies would you recommend for adoption based on the study made by Management Consultant. Credit Policy Increase in Collection Period (Days) Increase in Sales (₹) Present Default Anticipated (%) A 10 30000 1.5 B 20 48000 2 C 30 75000
trader has current sales at Rs Six lakhs per annum and an average collection period of 30 days wants to pursue a more liberal policy to improve sales. The selling price per unit is Rs.3, Average cost per unit is Rs.2.25 and the variable cost per unit is Rs 2. The current bad debt loss is 1%. Required return on additional investment is 20%. Assume as 360 days a year. Calculate net profit for each proposed plans. Which of the above policies would you recommend for adoption based on the study made by Management Consultant. Credit Policy Increase in Collection Period (Days) Increase in Sales (₹) Present Default Anticipated (%) A 10 30000 1.5 B 20 48000 2 C 30 75000
Chapter18: The Management Of Accounts Receivable And Inventories
Section: Chapter Questions
Problem 5P
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A trader has current sales at Rs Six lakhs per annum and an average collection period of 30 days wants to pursue a more liberal policy to improve sales. The selling price per unit is Rs.3, Average cost per unit is Rs.2.25 and the variable cost per unit is Rs 2. The current
Calculate net profit for each proposed plans. Which of the above policies would you recommend for adoption based on the study made by Management Consultant.
|
Credit Policy |
Increase in Collection Period (Days) |
Increase in Sales (₹) |
Present Default Anticipated (%) |
|
A |
10 |
30000 |
1.5 |
|
B |
20 |
48000 |
2 |
|
C |
30 |
75000 |
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