Jasper Company has the following financial information:

ANNUAL CREDIT SALES P4million

AVERAGE COLLECTION PERIOD 40 days

BAD DEBTS 5% OF SALES

The credit and collection manager is considering instituting a stricter collection policy, whereby bad debts would be reduced to 2% of the total sales, and the average collection period would fall to 30 days. However, sales would also fall by an estimated P500,000 annually. Variable costs are 60% of the sales and the cost of carrying receivables is 12%.

Required:

1. How much is the incremental contribution margin?

2. How much is the decrease in investment on accounts receivable?

3. How much is the savings in capital cost?

4. How much is the savings in delinquency cost?

5. How much is the incremental profit from the revised policy?