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.
Exercise 12-7 sell or process further
VALUE CHAIN ANALYSIS Every firm is a collection of activities that are executed to design, generate, market, deliver and support its products or services. Value chain analysis
Responsibility Accounting This is a term used to define the measuring of performance of decentralized units, using account results. Responsibility accounting recognizes various
solutions for (POS) slow printing of sales tickets and unpredictable action of cash drawers. when credit approvals delayed the checkout process or when the computer was down, thus
Markov Chains: Markov Chains are named after the Russian statistician A.A Markov who developed probabilistic models that are often applicable to decision making problems in bu
When the customers of the company are spread over broad geographical areas then in place of a particular collection centre the company opens collection centres at the regional stag
What have to Focus on Traditional standard costing In traditional cost systems focus is to meet standard cost measurement by avoiding unfavorable variances. Under kaizen coat
Computation of Working Capital Required 1. Operating Cycle Period = M+W+F+D-C = 101.38 +2
Explain the Scope of cost accounting Scope of cost accounting: the scope of cost accounting is very wide and includes the following: 1 cost ascertainment: it deals with t
How to write introduction on strategy plan
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