diversified
181 Points
Joined January 2009
Ans. 2 (b)
(b) RST Limited is considering relaxing its present credit policy and is in the process of evaluating two proposed
policies. Currently, the firm has annual credit sales of Rs. 225 lakhs and accounts receivable turnover ratio of 5 times a
year. The current level of loss due to bad debts is Rs. 7,50,000. The firm is required to give a return of 20% on the
investment in new accounts receivables. The company's variable costs are 60% of the selling price. Given the
following information, which is better option ? [ 8 marks ]
(Amount in Rs. Lakh)
Present Policy Policy Option I Policy Option II
Annual credit sales (Rs.)
Accounts receivable turnover ratio
Bad debt losses (Rs.)
225
5
7.5
275
4
22.5
350
3
47.5
Dear all
Above is question of Costing & F.M. CA PCC Nov. 2010, answer is given in jain online class, but i am not able to understand it, can some body explain we with formula and working notes in details