Assignment 2- Problem 2ABC Inc. is proposing a change in its credit policy to increase sales of Product XYZExisting terms is 1/10, net 30New terms is 2/20, net 40New sales level (all credit sales)Original sales level (all credit sales)Contribution Margin ration24,000,00020,000,00030%% bad debt losses on new sales level5%% bad debt losses on original sales levelNew average collection period (days)Original average collection period (days)Cost of CapitalCost of Goods sold as a percentage of sales2%261510%60%ABC also anticipates to have keep additional inventory.The inventory turnover rate would improve with new sales.Inventory turnover on new sales levelInventory turnover on original sales level10Financing cost for Working Capital isTax rateCurrent Liabilities for XYZ10%40%zero dollarsBefore credit policy changes, 75% of the customers takes the early payment discount.Anticipate only 70% of the customers would take the discount after the change.What is net annual benefit of changing to the new credit policy?

When goods are sold on credit, the seller extends short term finance to the buyer to make the…

ABC Inc. is proposing a change in its credit policy to increase sales of Product XYZ Existing terms is 1/10, net 30 New terms is 2/20, net 40 New sales level (all credit sales) Original sales level (all credit sales) Contribution Margin ration % bad debt losses on new sales level % bad debt losses on original sales level New average collection period (days) Original average collection period (days) Cost of Capital Cost of Goods sold as a percentage of sales $ $ 24,000,000 20,000,000 30% 5% 2% 26 15 10% 60%

ABC Inc. is proposing a change in its credit policy to increase sales of Product XYZ Existing terms is 1/10, net 30 New terms is 2/20, net 40 New sales level (all credit sales) Original sales level (all credit sales) Contribution Margin ration % bad debt losses on new sales level % bad debt losses on original sales level New average collection period (days) Original average collection period (days) Cost of Capital Cost of Goods sold as a percentage of sales $ $ 24,000,000 20,000,000 30% 5% 2% 26 15 10% 60%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Company A's gross profit rate last year was 32.0% and this year it is 28.4%. Which of the following would not be a possible cause for this decline in the gross profit rate? O Company A's average margin between unit selling price and inventory unit cost is decreasing. O Company A may have seen a decline in total gross profit while maintaining net sales. Company A may have begun selling products with a higher markup. O Company A must have paid higher prices to suppliers without passing these costs on to customers.
Please help with 7 through 10. Thank you!:)
1. If you have the following information about ice-cream manufacturing unit Year Net Discount rate Returns 10% 2500 1. 700 0.909 -1000 0.826 3. 1450 0.751 1200 0.683 1700 0.621 6. 1350 0.564 7. -750 0.513 450 0.467 6. 1300 0.424 10 900 0.386 Calculate a) Discounted Payback period b) IRR and if the hurdle rate 35%, shall we accept the project or not ? Why? ) NPV
a seller has offered credit terms of 2.5/5 net 50 to a customer that has agreed to immediately purchase 500 units at a sales price per unit of $100. variable costs are $65 per unit and involve an immediate cash outflow. the seller has an annual opportunity cost rate of 7.3%. based on this information, what is the present value of the net flows associated with the cash discount terms? is it - 16,201; 26,750; 81,201; 32,500
A firm is considering several policy changes to increase sales. It will increase inventory by $10,000 it will offer more liberal sales terms but will result in average receivables increasing by $65,000. These actions are expected to increase sales by $800,000 per year, and cost of goods will remain at 80% of sales. Because of the firm’s increased purchase of its won production needs, average payable increases by $35,000.What factors should they consider when making these decisions? What effects would they have on the firm’s cash cycle? Please select three financial ratios they should consider and why
I need the answers of 1-6.
3.1 REQUIRED Calculate the following from the information given below: 3.1.1 Break-even quantity. 3.1.2 Break-even value using the marginal income 3.1.3 Margin of safety 3.1.4 Total Marginal Income and Net Profit/Loss if the sales price is reduced to R90 per unit.INFORMATION Dynamo Ltd manufactures calculators. The following information was extracted from the budget for the year ended 31 December 2023: Sales volume 20 000 units Selling price per unit R100 Variable manufacturing cost per unit R50 Variable marketing cost per unit 10% of the unit selling price Fixed manufacturing cost R400 000 Fixed administration and marketing costs R200 000
[Question text] If D-Mart Bhd recently replaced its management team which use a flexible financing policy. Due to this policy changes, the company should_ Select one: O A. buy their inventory with cash O B. finance all company's assets with long-term debt C. use short-term financing in the seasonal peaks D. finance only long-term assets with long-term debt
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Q2. A company currently has annual sales of Rs. 500,000 and an average collection period of 30 days. It is considering a more liberal credit policy. If the credit period is extended, the company expects sales and bad-debt losses to increase in following manner: Credit policy А Increase in credit period Increase in sale (Rs) Bad debts % of total sales 25,000 1.2 35,000 1.5 40,000 1.8 50,000 ABCDE 10 days 15 30 42 2.2 The selling price per unit is Rs 2. Average cost per unit at the current level of operations is Rs. 1.50 and variable cost per unit is Rs. 1.20. if current bad debt loss is 1% and required rate of return on investment is 20%, which credit policy should be undertaken? Ignore taxes and assume 360 days in a year.