Ex$.2$ Assigment

A company that currently sells goods on a net $30-$day term is considering the possibility of lengthening its credit terms to $60$ days. The current year's sale is anticipated to be of the order of $2,00,000$ units at a selling price of $10$ each, with an average total unit cost at this volume of $9\mathrm{.}50($including $8\mathrm{.}00$ as variable cost and $1\mathrm{.}50$ as fixed cost$).$ Lengthening the credit period is expected to boost sales by $25\%$ to $2,50,000$ units. The management anticipates that as a result of an increase in credit period from one month to two months, collection costs would increase from $6,000$ to $8,000$ and bad debt losses would increase from $2\%$ to $2\mathrm{.}5\%$ of sales. The finance manager of the company feels that any additional investment in receivables should earn at least $13\%$ on investment.