2.

Please solve it correctly with steps.

2. A company dealing in kids' apparel has an annual credit sales turnover of Rs. 60 lacs through agents. Credit period allowed to them currently is 30 days and provision for bad debts is maintained at 0.5% of total credit sales. The company proposes to change its credit policy as follows: Proposal Provision for Bad Debts Credit Period 60 days 90 days Total Credit Sales Rs. 70 lacs Rs. 75 lacs 1% B 1.5% Assuming average contribution of 25% on sales, fixed costs of Rs. 5 lacs p.a. and an expected return of 20% on capital employed, evaluate the recommended proposals and suggest the best policy. (8) 3