Reference no: EM132700411
Question - Great Munchies (GM) Corporation has a variable operating cost ratio of 60 percent, its cost of capital is 12 percent, and current sales are P 100,000. All of its sales are on credit, and it currently sells on terms of net 30. Its accounts receivable balance is P 20,000. GM is considering a new credit policy with terms net 45. Under the new policy, sales will increase to P 120,000, and accounts receivable will rise to P 30,000.
Required -
1. How much is the additional contribution margin from sales?
a. P 20,000 b. P100,000 c. P 8,000 d. P120,000 e. None of these
2. Calculate the cost of marginal investment in accounts receivable?
a. P5,902 b. P7,407 c. P1,505 d. P181 e. None of these
3. What is the net profit (net loss) from the implementation of the proposed plan?
a. P8,000 net profit b. P12,000 net loss c. P7,819 net profit d. P42,000 net loss e. None of these
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