Turnover - 8 Turnover - 10

Benefits
Sales 1,080,000 900,000 180,000
Variable Cost 594,000 495,000 99,000
Contribution Margin 486,000 405,000 81,000

Cost
Discount Cost
Bad Debt Cost 1.50% 16,200 1% 9,000 7,200
Carrying Cost
Opportunity Cost/Cost of investment in AR
Ave. AR 135,000 90,000
Multiply by: VC Rate 55% 55%
Investment in AR 74,250 49,500
Rate of Return 20% 20%
Cost of Investment in AR 14,850 9,900 4,950
Total Marginal Cost 12,150
Net Benefit 68,850
Turnover = Sales/Ave. AR
Average AR = Sales/Turnover
 With Discount Without Discount

Sales in Units 715.00 700.00

SP per unit 250.00 250.00
VC per unit 187.50 187.50
VC RATIO 75% 75%
ACP 72.00 90.00
Discount taken 75% of sales -
No. of days to take disc 10.00
Rate of Return 20% 20%
Bad debts 0% 0.025%

Benefits
Sales 178,750.00 175,000.00
Variable Cost 134,062.50 131,250.00
Contribution Margin 44,687.50 43,750.00

Cost
Discounts Cost 2,681.25 -
Bad debts - 43.75
Carrying Cost -
Opportunity Cost
Average AR 35,750.00 43,750.00
VC % 75% 75%
Investment in AR 26,812.50 32,812.50
Rate of Return 20% 20%
5,362.50 6,562.50

Total Cost

Net Benefit
Inc/Decrease
3,750.00
2,812.50
937.50

2,681.25
(43.75)
-

(6,000.00)

(1,200.00)

1,437.50

(500.00)