Question

Niness Aimance (Papa no s. com. - Som
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Illustration : 2
M/S Nagpur Plywood's is facing tough competition and has proposed 3 different credit policies to
attract the customers. Suggest the best one. Cost of funds is 20% p.a. Take 360 days a year.
Credit period
30 days 60 days 90 days
Sales
10,00.000 12.50,000 15,00,000
Cost of sales
7.50,000 9,00.000 10.50,000
Stock in trade
1.50.000 2.00,000 2,50,000
Bad debt as a % to sales
296
4%
7%
Debtors / credit management expenses
25,000 50,000 75.000
Solution
Credit period
30 days 1 60 days. 90 days
Sales
10,00,000 12,50,000 15,00,000
Less : Cost of sales
7.50.000 1 9.00,000 | 10,50,000
Interest (WN-1)
42,500 70,000 1,02,500
Bad debts (WN-2)
20,000 50,000 1,05,000
Credit management expense
25,000 50.000 75,000
Net profit
1.62.500 1.80,000 1.67.500
Conclusion
Policy of 60 days credit gives the highest amount of profit, hence should be followed :
1.
Debtors at Cost
9,00,000 60
10,50,000 x 90
Stock in Trade
Total Funds Used
Interest @ 20%
Bad Debta
7.50,000
360 x 30
62,500
1,50,000
2,12,500
42,500
10,00.000 2%
20,000
360
1,50,000
2,00,000
3,50,000
70,000
12,50.000 x 4%
50,000
360
2,62,500
2,50.000
5,12,500
1,02,500
15,00,000 * 7%
1,05,000
2.




How to calculate stock in trade and total fund used​

Answer 1

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