Question: ABC Corporation sells its product for Php90 per unit for which it incurs a total of Php63 as variable cost per unit. Its annual credit

ABC Corporation sells its product for Php90 per unit for which it incurs a total of Php63 as variable cost per unit. Its annual credit sales (units) amounted to 80,000 units. Based on its current policy, it has a collection period of 20 days. It is now considering relaxing its credit standards. If it does, sales will increase by 20%; collection period will increase to 30 days; bad debts losses are anticipated to be 5% of the incremental sales; and collection costs will increase by Php50,000.

Required:

If the proposed relaxation of credit standards is implemented, what would be the net benefit (loss)?
rn

Step by Step Solution

★★★★★

3.46 Rating (153 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Net Benefit loss from relaxation of credit inc... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

A: Suppose a firm employs labor and capital k to produce output x using a homothetic, decreasing returns to scale technology. (a) Suppose that, at the current wage w, rental rate r and output price...

A firm sells its product for $30 per unit. Its direct material costs are $6 per unit and direct labour costs are $4. Manufacturing overhead costs are $40,000 per period and $8 per unit. Calculate the...

A company sells its product for $55 per unit. Write an expression for the amount of money received (revenue) from the sale of x units of the product.

NYX Inc. sells its product for $24 per unit and variable costs are $14 per unit. Its fixed costs are $130,000. Calculate the required sales in units to achieve its target operating income of 10% of...

Parador Company sells its product for $22 per unit. Its actual and projected sales follow. All sales are on credit. Recent experience shows that 40% of credit sales is collected in the month of the...

Walker Products fell behind in paying its vendors, and it now has a poor credit rating. Consequently, all suppliers demand cash on delivery (even employees are paid on a daily basis). The firm has a...

Refer to the information from Problem 10.49, Parts 1, 2, and 3. The budget indicates that the company is likely to incur a loss during the next period. The accountant asks you to assist him in...

R&D Computer Corporation sells its product, which has a variable cost equal to $21 per unit, for $50 per unit. Fixed operating costs are $360,000. To support operations, the firm requires $1,000,000...

FedEx Corporation sells its services for cash and on account. By selling on credit, FedEx cannot expect to collect $100 \%$ of its accounts receivable. Assume that at May 31, 2020 and 2019,...

The Calais Company stresses competition between the heads of its various divisions, and it rewards stellar performance with year-end bonuses that vary between 5% and 10% of division net operating...

The following schedule summarizes the inventory purchases and sales of Gregory, Inc. during February 2009: Required: (a) What is Gregorys cost of goods available for sale for February 2009? (b) If...

Every investor in the capital asset pricing model owns a combination of the market portfolio and a riskless asset. Assume that the standard deviation of the market portfolio is 30% and that the...

A company has made available to its employees (without charges) extensive club facilities that may be used before work, during the lunch hour, after work, and on weekends. The record for the last...

Check tampering schemes are unique among disbursement fraud schemes because.... It is the one group of schemes in which the perpetrator physically prepares the fraudulent check. the perpetrator does...

Consider the boundary value problem -u" +2u'- u= 1 u=1 u= -1 for 0

Ideally, which should come first, the model or the simulation? The model is created first because a simulation needs models to run. The two are unrelated and can be created in any order. They are...

Sandra Higgins is the marketing manager of Didget Finance Pty Ltd, a Sydney-based mortgage broking firm. She has sole use of a company-owned car. The car originally cost the company $58,300...

What would be a common list of issues you should be taught about, if you were about to be sent to China to conduct business? r

True or false Noncontrolling interest represents the portion of the subsidiary's net assets that is owned by the parent

Intermediate Accounting question Intermediate Accounting question It is November 1, 2010, the first business day of the month, and you have just been hired as the accountant for ABC Corporation,...

Question 1 (32 points) For the following series of business activities of ABC Corporation, show an equal entry in two separate accounts, i.e., changes to two accounts that balance. In each entry, you...

Question 2 A cement manufacturer has supplied the following data: Tons of cement produced and sold.... Sales revenue Variable manufacturing expense....... Fixed manufacturing expense...... Variable...

Question ABC Corporation sells its product for $12 per unit. Next year, fixed expenses are expected to be $400,000 and variable expenses are expected to be $8 per unit. How many units must the...

. Question 5 (20 marks) a) ABC Corporation sells its product for $195.70 per unit. In 2015 the company had total sales in units of 6,000. The total costs were the following: Variable cost of sales...

ABC Corporation sells its product for Php90 per unit for which it incurs a total of Php63 as variable cost per unit. Its annual credit sales (units) amounted to 80,000 units. Based on its current...