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Surya Industries Ltd. is marketing all its products through a network of dealers. All sales are on credit and the deder are given one month

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Surya Industries Ltd. is marketing all its products through a network of dealers. All sales are on credit and the deder are given one month time to settle bills. The company is thinking of changing the credit period with a view to increase its overall profits. The marketing department has prepared the following estimates for different periods oi credit: Present Policy Plan 1 Plan II Plan 1 1.5 2 3 Particulars Credit period (in months) Sales Lakhs) Fixed costs Lakhs) Bad debts (% of sales) 120 130 150 180 818 30 30 35 40 0.5 0.8 1 2 The company has a contribution/sales ratio of 40% further it requires a pre-tax return on investment at 20%. Evaluate each of the above proposals and recommend the best credit period for the company

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