Show computation for this case.

The business firm targets to increase its market share by adjusting its credit standards. With the new standards, the following changes are expected:

Sales will increase by 25%

The collection period will extend by one month

Uncollectible accounts are estimated to be 4% on the incremental sales

The collection costs will increase by P3,400

Below are the given data:

Unit Selling Price P7.00

Unit Variable Cost P4.50

Fixed Cost per unit P1.50

Annual Credit Sales 40,000 units

Collection Period 3 months

Rate of Return 19%

Question

- Should the proposed change in credit standards be adopted? why and why not, justify your answer.