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Determine which collection programme should be followed

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Golden Syntax has annual sales of Rs. 24 lakhs. The selling price per unit is Rs. 10 and variable cost is 70% of the selling price. The required rate of return on investment is 20%, average cost = Rs. 9 per unit, annual collection expenditure is Rs. 50,000 and percentage of default is 3%, credit terms 2 months. Golden syntax is considering the change in credit policy by following programme A or programme B.

Prog A
Prog B
Average collection period
1.5
1
Annual collection expenses
75,000
1,50,000
Percentage of default
2%
1%

Determine which collection programme should be followed by the company.

Reference no: EM132783032

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