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expected to double the current 1.5 percent level. The price per unit is P4,250, the variable cost per unit is P3,060. The firm’s required return on investment is 20 percent.

expected to double the current 1.5 percent level. The price per unit is P4,250, the variable cost per unit is P3,060. The firm’s required return on investment is 20 percent.

FINANCIAL ACCOUNTING
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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BRLM Company is planning to relax its credit standards to boost sales. As a result, sales are expected to increase 16 percent from 3,000 units per year to 3,480 units per year. The average collection period is expected to increase to 40 days from 30 days and bad debts are expected to double the current 1.5 percent level. The price per unit is P4,250, the variable cost per unit is P3,060. The firm’s required return on investment is 20 percent.

What is the cost of marginal bad debts under the proposed plan?

Group of answer choices

P168,300

P19,445

P38,838

P258,923

What is the net result of implementing the proposed plan?

Group of answer choices

–P312,474

+P168,274

+P319,260

–P168,274

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