Your first major assignment after your recent promotion at Company_X involves overseeing the management of accounts receivable and inventory. The first item that you must attend to is a proposed change in credit policy that would relax credit terms from the existing in hopes of securing new sales. The management at Company_X does not expect bad-debt losses on its current customers to change under the new credit policy. The following information should aid you in the analysis of this problem:

New sales level (all credit) = RM8,000,000 Original sales level (all credit) = RM7,000,000 Contribution margin = 25% Percentage of bad-debt losses on new sales = 8% New average collection period = 75 days Original average collection period = 60 days Additional investment in inventory = RM50,000 Pretax required rate of return = 15% New cash discount percentage = 2% Percentage of customers taking the new cash discount = 50% Original cash discount percentage = 1% Percentage of customers taking the old cash discount = 50%