Q$2.$ A company currently has annual sales of Rs$.500,000$ and an average collection period of $30$

days. It is considering a more liberal credit policy. If the credit period is extended, the company

expects sales and bad$-$debt losses to increase in following manner:

The selling price per unit is Rs $2.$ Average cost per unit at the current level of operations is Rs$.1\mathrm{.}50$

and variable cost per unit is Rs$.1\mathrm{.}20.$ if current bad debt loss is $1\%$ and required rate of return on

investment is $20\%,$ which credit policy should be undertaken? Ignore taxes and assume $360$ days in a

year.