KAY BONAVENTE

MYLENE LUNA

Present Sales
P 10,000000
To be increased
30%
Selling Price
P 50 / unit
Cost
P 40/unit
Required return
25%
Bad Debts
5%
Taxes
35%
CREDIT TERM:
From 60 days to 90 days
Determine the Incremental benefit

30% increase x P 10,000,000 =

P 3,000,000
No. of Units = P 3,000,000 P 50/unit = 60,000 units
Incremental Revenues
( P 10 x 60,000 units) =
Less: Bad Debts
( 2% x P 3,000,000 ) =
Margin before tax
=
Less: Taxes
( 35% x P 540,000)
=
Incremental Margin after tax =

P 600,000
P 60,000
P 540,000
P 189,000
P 351,000

INCREMENTAL INVESTMENT

Additional Receivables:
P 8,219.18 x 90 days = P 739, 726.20

Investment in additional receivables:

Cost Ratio:
80% x P 739, 726.20 = P 591, 780.96

Required Return
P 591, 780.96 x 25% = P 147, 945.24

Net Incremental Benefit:

(P 351,000 - P 147, 945.24)

P 203,054.76