A company currently has Rs.1000,000 annual sales, all on credit terms of 60 days. The average...

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A company currently has Rs.1000,000 annual sales, all on credit terms of 60 days. The average credit taken is, however, 80 days. It is considering offering a discount of 3% within 7 days, and it expects that 60% of the existing customers will take the discount. The remainder will be equally split between those paying after 80 days and those paying after 100 days. The new credit terms are also expected to generate an additional Rs.50,000 of sales. Variable costs are 80% of sales price and the company's bank overdraft costs are 14%. The company wishes to know whether offering the discount is worth-while if: a. No new sales are obtained b. New sales are obtained as described above (year may be taken consisting of 365 days) 2.000.000 Variabla A company currently has Rs.1000,000 annual sales, all on credit terms of 60 days. The average credit taken is, however, 80 days. It is considering offering a discount of 3% within 7 days, and it expects that 60% of the existing customers will take the discount. The remainder will be equally split between those paying after 80 days and those paying after 100 days. The new credit terms are also expected to generate an additional Rs.50,000 of sales. Variable costs are 80% of sales price and the company's bank overdraft costs are 14%. The company wishes to know whether offering the discount is worth-while if: a. No new sales are obtained b. New sales are obtained as described above (year may be taken consisting of 365 days) 2.000.000 Variabla

Answer rating: 100% (QA)

Analyzing the Discount Offer for the Company Scenario a No new sales obtained Heres the analysis for ... View the full answer