The credit manager of ABC Company has to decide on a proposal for liberal extension of credit which would result in a slowing process of the average collection period from one to two months. The company’s product is sold for Rs.20 per unit, of which Rs.15 representing variable cost. The current actual sales amounting to Rs 2,400,000, entirely on credit the average total cost per unit is Rs.18.   The relaxation in credit policy is expected to result in a 25% increase in sales. The required rate of return is 25% on investment.   Calculate the cost of investment in receivables, if credit period is allowed to customers is one month

Q: Assuming a 365-day year, calculate the net income under the current policy and the new policy. Do…

A: Please see the answer below ?? Net income:     Under current policy $240,801…

Q: KK Corporation is analyzing its option to restrict its credit terms. Current sales level is…

A: Credit Policy Evaluation is calculated using total cost incurred under different scenarios and the…

Q: JJ Corporation is analyzing its option to restrict its credit terms. Current sales level is…

A: solution below are the given details about both situations For current Current sales level…

Q: The Snedecker Corporation is considering a change in its cash-only policy. The new terms would be…

A: = Sales*(selling price- cost price) = 2,150*(53-31)= 47,300

Q: sells tyres on credit only. The management of the company estimated that it could increase sales by…

A: Collection period is period required to receive payments from customers that are due to customers…

Q: Kitchen Enterprises is evaluating a proposal to  lengthen its credit period from 30 to 45 days. All…

A: Accounts receivables are those customer accounts to whom business has made credit sales on account…

Q: A company plans to tighten its credit policy. The new policy will decrease the average number of…

A: In a credit policy if the collection period is reduced, the turnover of the business and accounts…

Q: Gallant Sdn. Bhd., offers a credit period of 4 weeks.  The price and cost per unit of its product…

A: Since you have posted more than 3 sub-parts, we will provide the solution only to the first three…

Q: Solve this

A:

Q: Toshiba Company is considering offering a cash discount to speed up the collection of account…

A: Contribution= Sales - Variable Cost

Q: Dome Metals has credit sales of $198,000 yearly with credit terms of net 120 days, which is also the…

A: Increase in profit = Current sales* increase in sales%= 198,000*20%*25% = 9,900Old accounts…

Q: considering granting credit to retailers with total assets as low as $400,000. Currently the lowest…

A:

Q: ompany hasnual credit sales-$10 million Average collection period-60 days t 30. Interest rate=10%.…

A: Companies give discounts to customers so that customers pay early to avoid possible losses on debt…

Q: Lewis Enterprises is considering relaxing its credit standards to increase its currently sagging…

A: Debtor receivable management is a technique of finding additional profit/increase in sales value due…

Q: Need Correct Answer

A:

Q: Brevard Inc is considering changing its credit terms from net 55 to net 30 to bring its terms in…

A: Cost of Carrying Receivables = Sales * DSO/ Total number of Days * Variable Cost * Opportunity Cost…

Q: Reed plc is considering how to improve its debtor collection policy. The following information is…

A: i.   Current New Sales £912,000 £872000 (912,000-40000) (-) VC (80%, Since contribution is…

Q: Bulldogs Inc. has a variable cost ratio of 20% and a 10% receivable financing cost. The firm is…

A:

Q: Fitzgerald Corporation currently has an all-cash credit policy. It is considering making a change in…

A: Net present value is the metric that takes into account the time value of money in evaluating the…

Q: Edward Enterprises is considering relaxing its credit standards to increase its currently sagging…

A: Working Note :-                                   Increase in gross…

Q: 58. ABC Company plans to tighten its credit policy. The new policy will decrease the average number…

A: The questions are multiple choice questions  Required  Choose the Correct Option.

Q: Breeze Corp. is planning to change its credit terms from 4/10, n/30 to 5/15, n/35. Currently, 50% of…

A: Days sales outstanding refer to average number of days that an organisation or a company takes to…

Q: CJ Stores has current cash-only sales of 218 units per month at a price of $236.55 a unit. If it…

A: Sales in units = 218 units per monthSales price per unit = 236.55After net 30 credit policy:Sales…

Q: The change in the credit policy would result to increase (decrease) in incremental profit of (Use…

A: The increase in incremental profit is when the total benefit derived from credit policy is higher…

Q: Soler Inc. wishes to speed up collection of its receivables.  Soler currently offers credit terms of…

A: Company give lot of discount to the customers to reduce the time required to recover money from…

Q: Codiac Corp. currently has an all-cash credit policy. It is considering making a change in the…

A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…

Q: The Branson Corporation is considering a change in its cash-only policy. The new terms would be net…

A: Credit Cost = Price per unit as per new policy x Required ReturnIn the given case, the break even…

Q: To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day…

A: Average collection period refers to the duration within which a company is able to recover its…

Q: mine plc has annual credut of k15m and allows 90 days credit. it is consideringba 2% discount…

A: Calculation of Current Interest Cost Note: Since the customers pay back after 90 days, amount due…

Q: Bulldogs Inc. has a variable cost ratio of 20% and a 10% receivable financing cost. The firm is…

A: Following is the calculation of Accounts Receivable balance under old credit standard.

Q: Bird's Eye Treehouses, Incorporated, a Kentucky ompany, majority of its customers are located in the…

A: Average number of payments per day$880.00Average value of the payment$830.00Variable lockbox fee…

Q: The Branson Corporation is considering a change in its cash-only policy. The new terms would be net…

A: Breakeven quantity refers to the number of units at which the total contribution, after factoring in…

Q: A meeting was held at ABC Ltd due to decreased sells. Marketing manager blamed the current policy of…

A: Easing a firm's credit policy will increase the sales. As a result, the costs of production will…

Q: Get Answer

A: To evaluate the proposed relaxation of credit standards, assess the impact on the company's…

Q: BayFish Company currently uses maximum trade credit by not taking discounts on its purchases.…

A: If the firm plans to use trade discount. Then firm should borrow notes. $10000 per day borrow. And…

Q: KK Corporation is analyzing its option to restrict its credit terms. Current sales level is…

A: solution given For current Current sales level                  =P6,000,000 average receivables…

Q: Dome Metals has credit sales of $450,000 yearly with credit terms of net 45 days, which is also the…

A: Credit management is considered to be important part. Discount are offered in order to receive…

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.