XYZ corporation whose current sales are in the region of Rs. 6 lakhs per annum and...

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XYZ corporation whose current sales are in the region of Rs. 6 lakhs per annum and an average collection period of 30 days wants to pursue a more liberal policy to improve sales. A study made by a management consultant reveals the following information: Credit Policy A B C Increase in D Collection period 10 days Increase in Sales Rs. 30000 20 days 30 days 45 days The selling price per unit is Rs. 3. Average cost per unit is Rs. 2.25 and variable cost per unit is Rs. 2. The current bad debt loss is 1%. Required return on additional investment is 20%. Assume a 360 days year. Which of the above policies would you recommend for adoption? Rs. 48000 Rs. 75000 Present default Rs. 90000 anticipated 1.5% 2% 3% 4% XYZ corporation whose current sales are in the region of Rs. 6 lakhs per annum and an average collection period of 30 days wants to pursue a more liberal policy to improve sales. A study made by a management consultant reveals the following information: Credit Policy A B C Increase in D Collection period 10 days Increase in Sales Rs. 30000 20 days 30 days 45 days The selling price per unit is Rs. 3. Average cost per unit is Rs. 2.25 and variable cost per unit is Rs. 2. The current bad debt loss is 1%. Required return on additional investment is 20%. Assume a 360 days year. Which of the above policies would you recommend for adoption? Rs. 48000 Rs. 75000 Present default Rs. 90000 anticipated 1.5% 2% 3% 4%

Answer rating: 100% (QA)

Policy A Increase in collection period 10 days Increase in sales Rs 30000 Default anticipated 15 Add... View the full answer