Calculate the incremental profit and loss after tax

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Reference no: EM132910379

Question - XYZ Enterprises is considering extending credit to some customers. Sales will increase by R400 000 if credit is granted to these customers. From the new accounts receivable generated, 6% is expected to be uncollectable. Additional collection costs will be 3% of sales and production and selling costs will be 70% of sales. The corporate tax rate is 28%.

Required - Use the information provided below to:

1. Calculate the incremental profit/loss after tax.

2. Determine the return on sales if these new customers are accepted.

Reference no: EM132910379

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