09-06-2011, 03:13 PM
A firm is desiring an increase in credit period 20
from 30 to 60 days. The average collection
period which is 45 days at present is
expected to increase to 75 days. It is also
likely that the bad debt expenses increase
from 1% to 3% of sales. Total credit sales
are expected to increase from the level of
30,000 units to 34,500 units. The present
average cost per unit is Rs. 8, the variable
cost and selling price per unit are Rs.6 and
Rs.10 respectively. Assume that the firm
expects a return of 15%, should the firm
extend credit period ?
from 30 to 60 days. The average collection
period which is 45 days at present is
expected to increase to 75 days. It is also
likely that the bad debt expenses increase
from 1% to 3% of sales. Total credit sales
are expected to increase from the level of
30,000 units to 34,500 units. The present
average cost per unit is Rs. 8, the variable
cost and selling price per unit are Rs.6 and
Rs.10 respectively. Assume that the firm
expects a return of 15%, should the firm
extend credit period ?
