TOTAL ORDER COST = 2304 Annual Demand EOQ

24000 400
Frequnecy order= 60
Order cost= 38.4

TOTAL CARRYING COST = 2304 Ave.Inventory= 200

Carrying cost per unit= 11.52

DAILY USAGE= 3 annual usage working days

720 240

SAFETY STOCK 45 Average Usage maximum lead time

3 45

REORDER POINT 135 Average Usage maximum lead time

3 45

AGING ACCOUNTS RECEIVABLE

Age of Account balance outstanding percentage
0-30 days ₱ 500,000.00 50%
31-60 days ₱ 120,000.00 12%
61-90 days ₱ 200,000.00 20%
91-120 days ₱ 100,000.00 10%
over 120 days ₱ 80,000.00 8%
totals ₱ 1,000,000.00 100%
RELAXED CREDIT POLICY
turnover turnover
8 10
Benefits NET EFFECT
sales ₱ 1,080,000.00 ₱ 900,000.00 ₱ 180,000.00
variable cost ₱ 594,000.00 ₱ 495,000.00 ₱ 99,000.00
contribution margin ₱ 486,000.00 ₱ 405,000.00 ₱ 81,000.00

cost NET EFFECT

discount cost
bad debt cost ₱ 16,200.00 ₱ 9,000.00 ₱ 7,200.00
carrying cost
opportunity cost
average AR ₱ 135,000.00 ₱ 90,000.00
multiply by:VC Rate 55% 55%
investment in AR ₱ 74,250.00 ₱ 49,500.00
rate of return 20% 20%
cost of investmet in AR ₱ 14,850.00 ₱ 9,900.00 ₱ 4,950.00
total marginal cost ₱ 12,150.00
net benefit ₱ 68,850.00
 normal lead time
30

percentage increase in sales 20%

variable cost ratio 55% sales in units
SP per unit
VC unit
increase in profit contribution margin from the sales VC RATIO
ACP
Discount taken
bad debts now 1% of sales No. of days to take disc
bad debts new 1.50% of sales Rate of Return
Bad debts

Benefits
sales
variable cost
contribution margin

cost
discount cost
bad debt cost
carrying cost
opportunity cost
average AR
VC%
investment in AR
rate of return
cost of investmet in AR
total marginal cost
net benefit
 STRICT POLICY
with discount without discount

715 700
250 250
187.5 187.5
75.00% 75.00%
72 90
75%
10
20% 20%
0% 0.025%

NET EFFECT
₱ 178,750.00 ₱ 175,000.00 ₱ 3,750.00
₱ 134,062.50 ₱ 131,250.00 ₱ 2,812.50
₱ 44,687.50 ₱ 43,750.00 ₱ 937.50

NET EFFECT
₱2,681.25 ₱2,681.25
₱ 43.75 -₱43.75
₱ 35,750.00 ₱ 43,750.00
75% 75%
₱ 26,812.50 ₱ 32,812.50
20% 20%
₱ 5,362.50 ₱ 6,562.50 -₱ 1,200.00
₱1,437.50
-₱ 500.00
minor increase in sales 15
discount offered 2%

360
SALES/360*ACP
1.MARGINAL INVESTMENT -₱ 6,000.00
2.COST OF MARGINAL INV. -₱ 1,200.00 savings
3. SAVINGS OF MARGINAL BAD DEBTS -₱43.75 savings
4.cost of maginals cash discount ₱2,681.25
5. Net result -₱ 500.00 loss