Cutie Co is releasing a new product and is planning on the credit policy for this specific product. It is deciding between two options that has different collection days. Policy Options Collection period Bad debts percentage A 30 days 4% B 90 days 10% As this is a new product, it does not affect current customers of Cutie Co. The credit policy selected is expected to lead to an increase in annual sales of: Option A: $1,200,000 Option B: $2,200,000 The gross profit margin is 30% and the cost of financing is 9%. Assume that one year has 360 days. Comparing between option A and option B, which credit policy should be selected? Show the relevant workings clearly.

Answer rating: 100% (QA)

To compare the two credit policy options A and B for Cutie Cos new product we need to consider the i... View the full answer