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YoungStar Corporation is currently selling its products for RM50 per unit and all sales are on credit. In the year 2022,20,000 units were sold. The
YoungStar Corporation is currently selling its products for RM50 per unit and all sales are on credit. In the year 2022,20,000 units were sold. The variable cost per unit is RM20. The company is deciding to relax its credit standards which will increase sales by 5%, increase average collection period (ACP) from 25 days to 30 days, and increase bad debts from 3% to 6% of credit sales. The opportunity cost of tying up funds in its account receivable is 6% Required: a. Calculate the additional profit from the increase in sales. (5 marks) b. Calculate the cost of additional investment in accounts receivable. (5 marks) c. Calculate the overall benefit/loss . (5 marks) d. Should YoungStar Corporation relax its credit standards and Why
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