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A company with a 10% opportunity cost on account receivables planning to give a discount credit term SAR3/10 net 30 for early settlement credit on
A company with a 10% opportunity cost on account receivables planning to give a discount credit term SAR3/10 net 30 for early settlement credit on account receivables. It is expected that 65% of customers will take this discount. This discount will increase the sales by 8% and decrease the average collection period of account receivables from 45 days to 35 days. Current total cost is SAR3, 350,000 with the total fixed cost of SAR2,000,000. The price is given as SAR60,00 per unit and the current sale is 30,000 units. Do and Show all the necessary calculations to decide if the company should initiate the discount or not. (All calculations must be shown, without calculations, no marks will be given)
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