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Mary Corporation's average daily sales is P 640,000, 10% of which is cash sales. The variable ratio is 60%. Starting next year, July Corporation will
Mary Corporation's average daily sales is P 640,000, 10% of which is cash sales. The variable ratio is 60%. Starting next year, July Corporation will relax its credit operations. The relaxation in credit standards is expected to cause the following changes: 1) The credit sales will increase by 20% 2) The collection period for incremental sales is 60 days. The payment behavior of the existing customers will not change. The variable cost ratio, even for the incremental sales, will be the same as in the past. The cost of borrowing is estimated at 9% per annum. The company uses 360 days in a year in all its computation. Required: What is the corporation's expected benefit (loss) from the planned relaxation of credit policy
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