Use the following information for questions 14 to 16:

Sonya Company is considering changing its credit terms from 2/15, net 30 to 3/10, net 30 in order to speed collections. At present, 40% of Sonya’s
customers take the 2% discount. Under the new term, discount customers are expected to rise to 50%. Regardless of the credits terms, half of the
customers who do not take the discount are expected to pay on time, whereas the remainder will pay 10 days late. The change does not involve a
relaxation of credit standards, therefore, bad debt losses are not expected to rise above their present 2% level. However, the more generous cash
discount terms are expected to increase sales from P 2 million to P 2.6 million per year. Sonya’s variable cost ratio is 75%, the interest rate on
funds invested in accounts receivable is 9%, and the firm’s income tax rate is 40%.
14. What are the days sales outstanding (DSO) before and after the change of credit policy?
a. 27.0 days and 22.5 days, respectively. c. 22.5 days and 21.5 days, respectively.
b. 22.5 days and 27.0 days, respectively. d. 21.5 days and 22.5 days, respectively.

15. The incremental carrying cost on receivable is:

a. 843.75 c. 643.75
b. 8,889.00 d. 6,667.00

16. The incremental after tax profit from the change in credit terms is:
a. 68,493 c. 60,615
b. 65,640 d. 57,615

17. Every 15 days a company receives P 10,000 worth of raw materials from its suppliers. The credit terms for these purchases are 2/10, net 30,
and payment is made on the 30th day after each delivery. Thus, the company is considering a 1-year bank loan for P 9,800 (98% of the invoice
amount). If the effective annual interest rate on this loan is 12%, what will be the net peso savings over the year by borrowing and then taking the
discount on the materials?
a. 3,624 c. 4,800
b. 1,176 d. 1,224

18. The Sales Director of Go Company suggests that certain credit terms be modified. He estimates the following effects:
“Sales will increase by at least 20%; Accounts receivable turnover will be reduced to 8 times from the present turnover of 10 times; Bad debts,
now at 1% of sales increase to 1.5%. Sales before the proposed changes is at P 900,000. Variable cost ratio is 55% and desired rate of return is
20%. Fixed expenses amount to P 150,000.” Should the company allow the revision of its credit terms?
a. Yes, because income will increase by P 64,800 c. No, because income will be reduced by P 13,000
b. Yes, because losses will be reduced by P 78,800. d. No, because losses will be increased by P 28,000

19. The sales manager of Roger Company feels confident that, if the credit policy at Roger’s were changed, sales would increase and,
consequently, the company would utilize excess capacity. The two credit proposals being considered are as follows:
Proposal A Proposal B
Increase in sales 500,000 600,000
Contribution margin 20% 20%
Bad debts percentage 5% 5%
Increase in operating profits 75,000 90,000