MBA 106 - MANAGERIAL ACCOUNTING
Final Evaluation
Name: __________________________________ Date: June 26, 2021
PROBLEM 1 – WORKING CAPITAL MANAGEMENT
Jasper Company has the following financial Information:
ANNUAL CREDIT SALES P4 million
AVERAGE COLLECTION PERIOD 40 days
BAD DEBTS 5% of sales
The credit and collection manager is considering instituting a stricter collection policy, whereby bad
debts would be reduced to 2% of the total sales, and the average collection period would fall to 30
days. However, sales would also fall by an estimated P500,000 annually. Variable costs are 60% of
sales and the cost of carrying receivables is 12%.
Required:
1. How much is the incremental contribution margin?
2. How much is the decrease in investment on accounts receivable?
3. How much is the savings in capital cost?
4. How much is the savings in delinquency cost?
5. How much is the incremental profit from the revised policy?