Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
M/s ABC has an existing sales of Rs.50 lakhs and permits a credit period of 30 days to its customers. The firm cost of capital is 10% and the ratio of variable cost to sales is 85. The firm is contemplating on rising the credit period to 60 days that would result in raised sales of Rs.5 lakhs. The bad debts on raised sales are expected to be 8%. The tax rate for M/s ABC is 40 percent. Must the firm extend the credit period?
Solution
? I = (ACPn - ACP0) [S0/360] + V(ACPn)( ?S/360)
? I = (60 - 30) [50/360] + 8.5 × 60 × 5/360
? I = (30) × 50/360 + .708333
?I = 4.8749997 × 1, 00,000
= 4, 87,500
= 4, 874,99.9
?NP = [ ?S (1 - V ) - ? Sbn ] (1 - t ) - k?I
= [5 (015 ) - 5 × .08 ] (1 - 04 ) - .10 × 4,87 ,500
= [.75 - .4] (.6) - 4.875000
= (.35 ) (-6) - .48750
= (.21 - .48750 ) × 1,00 ,000
= - 27 ,750
The raise in credit period results in a negative net profit thus the credit period must not be extended.
The other source of spontaneous short-term financing is the accrued expenses which arise by the general conduct of business. An accrued expense is an expense which has been incurre
Excess machine hours 20,000. Received offers from two companies to buy 210,000 units of F at 0.60 and 300,000 units of D at 0.70. Estimated costs for the two products are;
Direct materials,4yard at$3.50per yard...$14.00 Direct labor,1.5direct labor hours at $12.00 per direct labor hour....$18 Variableoverhead,1.5 direct labour hours at $2.00 per dire
Just-in Time (JIT) Inventory management JIT is a system whose purpose is to generate or to purchase products or components as they are required by customers or for use rather
Advantages of incremental budgeting a) The budget is stable and change is gradual b) Managers can operate their departments on a steady basis c) The system is relatively
State the Opportunity cost The net selling price, rental value or transfer value which could be obtained at a point in time if a particular asset or group of the assets were to
CONSULTING PROJECT Pricing and Production Decisions at PoolOut Ltd PoolOut Ltd manufactures and sells a single product called the "RainIn", which is a patent-protected au
A cash budget is one of the main important devices to plan and control cash payments and receipts. In preparation of a cash budget the subsequent points are considered. Cred
Explain Zero bases budgeting According to David humdinger According to David humdinger, ZBB is a management tool which provides a systematic method for evaluating all operation
Characteristics of standard costing 1) Flow of information : in a standard costing system cost information flows in a straight forward manner as material is requisitioned and
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd