X Ltd. has annual sales of 10,000 units at $300 per unit. The annual fixed costs amount
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Question:
X Ltd. has annual sales of 10,000 units at $300 per unit. The annual fixed costs amount to $300,000. The variable cost is $200 per unit. The current credit period is 1 month. The company is considering a proposal to increase the credit period.
Fixed cost will increase by $60,000 on account of increase in sales beyond 25% of present level. The company plans a pre-tax return of 15% on investment in receivables.
Requirements;
1. Calculate the most paying credit policy for the company.
2. Analyze the results in detail.
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