3.21. Calculate the incremental profit/loss after tax.

INFORMATION:

Osmans Stores is considering extending credit to some customers who may be at risk of defaulting in payment. Sales will increase by R620 000 if credit is granted to these customers. From the new accounts receivable generated, 8% is expected to be uncollectable. Additional collection costs will be 4% of sales, and the production and selling costs will be 65% of sales. The firm is subject to tax at 28%.

3.2.1 Calculate the incremental profit/loss after tax. (8 marks)

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