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.
Limitation of break even charts Despite many advantages a break even chart suffers from the following limitations: 1) A break even chart is based upon a number of assumption
The Baumol Model in 1952 considers cash management complication as same to inventory management problem. For itself the firm attempts to minimize the total cost that is the sum of
Characteristics of irrelevant costs
INTERPRATATION OF VARIANCE Controllability, Materiality and Trend are the interpretation of variance. The point of comparing flexed budget and real figures is to see what corre
Ask question #MRead ALL instructions before getting started! ABC Corporation is a new company that buys and sells office supplies. Business began on January 1, 2014. Given on th
I want some to solve my process costing problem solved
Given the persistent problem with starvation in some parts of the world, and the anticipated population growth in developing nations, do we need genetically modified foods? Is it r
stetment
Introduction of zero base budgeting Steps involved in the introduction of zero base budgeting 1) Corporate objectives should be established and laid down in detail 2) Dec
It refers to the length of time given to the buyer to pay for their purchases. Throughout this period no interest is charged on the excellent amount. The credit period usually vari
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