Accountancy, asked by srksmarterjbd, 5 months ago

7. A company sells a product at Rs 30/- per unit with a variable cost of Rs 20/- per unit. The fixed cost is Rs 625000/- per annum. Total annual sales on credit are amounting to Rs 75 Lakhs. It is expected that if the existing period of credit of 30 days is enhanced to 60 days, sales could increase by Rs 6,00,000/- per annum. Also it is expected that bad debts may also increase from 2% to 4% if company adopts for the proposed policy of 60 days. The company expects a return of 20% prior to taxation. You are to place a note to the board of directors justifying your recommendations on the basis of mathematical calculation with logic stating that whether the company should go for proposed credit policy or not.

Answers

Answered by alliyasaimazara
5

Answer:

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Answered by maithilived
0

Answer:

⇒ Here, price per unit (p)=Rs.6

⇒ Total revenue R(x)=p.x=6x where x is the number of unit sold.

⇒ Cost function C(x)=4500+

100

25

R(x)

⇒ Cost function C(x)=4500+

100

25

×6x

⇒ C(x)=4500+

2

3

x

⇒ Profit function P(x)=R(x)−C(x)

⇒ P(x)=6x−(4500+

2

3

x)

∴ P(x)=6x−

2

3

x−4500

⇒ At break even point P(x)=0

⇒ 6x−

2

3

x−4500=0

2

12x−3x

−4500=0

⇒ x=

9

9000

=1000

⇒ Hence, x=1000 is break even point.

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