How do you set this problem up? Can you work through the steps and explain what you are doing on each.
Company XYZ is going to relax its credit standards. The proposal will increase sales by 20% from 10 million. The average collection period is expected to increase from 35 to 50 days and bad debts are expected to increase from 2% of sales to 7%. The firms variable cost =60% of sales and fixed cost total 2.5 million per year. The opportunity cost is 16%. Assume a 365 day year. Determine net profit(cost) of the proposed relaxation of credit standard.© BrainMass Inc. brainmass.com June 3, 2020, 6:27 pm ad1c9bdddf
This solution helps in determining the net profit(cost) of the proposed relaxation of credit standard.