National Co. believes that its collection costs could be reduced through modification of collection procedures. This action is expected to result in a lengthening of the average collection period from 30 to 40 days; however, there will be no change in uncollectible accounts, or in total credit sales. Furthermore, the variable cost ratio is 65%, the opportunity cost of a longer collection period is assumed to be negligible, the company's budgeted credit sales for the coming year are P45,000,000, and the required rate of return is 5%. To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day year and ignoring taxes) must be * O
National Co. believes that its collection costs could be reduced through modification of collection procedures. This action is expected to result in a lengthening of the average collection period from 30 to 40 days; however, there will be no change in uncollectible accounts, or in total credit sales. Furthermore, the variable cost ratio is 65%, the opportunity cost of a longer collection period is assumed to be negligible, the company's budgeted credit sales for the coming year are P45,000,000, and the required rate of return is 5%. To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day year and ignoring taxes) must be * O
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:National Co. believes that its collection costs could be reduced through modification of
collection procedures. This action is expected to result in a lengthening of the average
collection period from 30 to 40 days; however, there will be no change in uncollectible
accounts, or in total credit sales. Furthermore, the variable cost ratio is 65%, the opportunity
cost of a longer collection period is assumed to be negligible, the company's budgeted credit
sales for the coming year are P45,000,000, and the required rate of return is 5%. To justify
changes in collection procedures, the minimum annual reduction of costs (using a 360-day
year and ignoring taxes) must be * .
Format: 11,111
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