Question 5 [45]
Gentronics (Pty) Ltd manufactures and sells a rechargeablebattery-operated lamp. The
company sells the lamps both for cash and on credit. Companymanagement is
contemplating relaxing its existing credit standards in order toboost sales and profits.
The company provided you with the following information relatingto this lamp:
ï‚· The current selling price is R150.00 per unit.
ï‚· Total sales for 2018 were 80 000 units.
The variable cost per unit is R80.00.
ï‚· The total fixed cost is R1 200 000.
ï‚· Current credit terms are 30 days from date of purchase.
ï‚· Current bad debts are 1% of sales.
ï‚· Owing to tough business conditions the company is consideringrelaxing its current credit
standards and in doing so, anticipates the following to happenas a result:
o An expected increase of 8% in current total sales
o An increase in the average collection period to 40 days
o An expected increase of 2% in bad debts
 The company’s opportunity cost of tying up funds in tradereceivables is 15%.
ï‚· A trading year consists of 365 days.
Required
Show all calculations rounded off to the closest rand ornearest whole number.
Use the information provided by Gentronics in order to determinethe impact of the proposed
relaxation in credit standards on profits.
Question 5 [45]
Gentronics (Pty) Ltd manufactures and sells a rechargeablebattery-operated lamp. The
company sells the lamps both for cash and on credit. Companymanagement is
contemplating relaxing its existing credit standards in order toboost sales and profits.
The company provided you with the following information relatingto this lamp:
ï‚· The current selling price is R150.00 per unit.
ï‚· Total sales for 2018 were 80 000 units.
The variable cost per unit is R80.00.
ï‚· The total fixed cost is R1 200 000.
ï‚· Current credit terms are 30 days from date of purchase.
ï‚· Current bad debts are 1% of sales.
ï‚· Owing to tough business conditions the company is consideringrelaxing its current credit
standards and in doing so, anticipates the following to happenas a result:
o An expected increase of 8% in current total sales
o An increase in the average collection period to 40 days
o An expected increase of 2% in bad debts
 The company’s opportunity cost of tying up funds in tradereceivables is 15%.
ï‚· A trading year consists of 365 days.
Required
Show all calculations rounded off to the closest rand ornearest whole number.
Use the information provided by Gentronics in order to determinethe impact of the proposed
relaxation in credit standards on profits.
Question 5 [45]
Gentronics (Pty) Ltd manufactures and sells a rechargeablebattery-operated lamp. The
company sells the lamps both for cash and on credit. Companymanagement is
contemplating relaxing its existing credit standards in order toboost sales and profits.
The company provided you with the following information relatingto this lamp:
ï‚· The current selling price is R150.00 per unit.
ï‚· Total sales for 2018 were 80 000 units.
The variable cost per unit is R80.00.
ï‚· The total fixed cost is R1 200 000.
ï‚· Current credit terms are 30 days from date of purchase.
ï‚· Current bad debts are 1% of sales.
ï‚· Owing to tough business conditions the company is consideringrelaxing its current credit
standards and in doing so, anticipates the following to happenas a result:
o An expected increase of 8% in current total sales
o An increase in the average collection period to 40 days
o An expected increase of 2% in bad debts
 The company’s opportunity cost of tying up funds in tradereceivables is 15%.
ï‚· A trading year consists of 365 days.
Required
Show all calculations rounded off to the closest rand ornearest whole number.
Use the information provided by Gentronics in order to determinethe impact of the proposed
relaxation in credit standards on profits.
Question 5 [45]
Gentronics (Pty) Ltd manufactures and sells a rechargeablebattery-operated lamp. The
company sells the lamps both for cash and on credit. Companymanagement is
contemplating relaxing its existing credit standards in order toboost sales and profits.
The company provided you with the following information relatingto this lamp:
ï‚· The current selling price is R150.00 per unit.
ï‚· Total sales for 2018 were 80 000 units.
The variable cost per unit is R80.00.
ï‚· The total fixed cost is R1 200 000.
ï‚· Current credit terms are 30 days from date of purchase.
ï‚· Current bad debts are 1% of sales.
ï‚· Owing to tough business conditions the company is consideringrelaxing its current credit
standards and in doing so, anticipates the following to happenas a result:
o An expected increase of 8% in current total sales
o An increase in the average collection period to 40 days
o An expected increase of 2% in bad debts
 The company’s opportunity cost of tying up funds in tradereceivables is 15%.
ï‚· A trading year consists of 365 days.
Required
Show all calculations rounded off to the closest rand ornearest whole number.
Use the information provided by Gentronics in order to determinethe impact of the proposed
relaxation in credit standards on profits.
Question 5 [45]
Gentronics (Pty) Ltd manufactures and sells a rechargeablebattery-operated lamp. The
company sells the lamps both for cash and on credit. Companymanagement is
contemplating relaxing its existing credit standards in order toboost sales and profits.
The company provided you with the following information relatingto this lamp:
ï‚· The current selling price is R150.00 per unit.
ï‚· Total sales for 2018 were 80 000 units.
The variable cost per unit is R80.00.
ï‚· The total fixed cost is R1 200 000.
ï‚· Current credit terms are 30 days from date of purchase.
ï‚· Current bad debts are 1% of sales.
ï‚· Owing to tough business conditions the company is consideringrelaxing its current credit
standards and in doing so, anticipates the following to happenas a result:
o An expected increase of 8% in current total sales
o An increase in the average collection period to 40 days
o An expected increase of 2% in bad debts
 The company’s opportunity cost of tying up funds in tradereceivables is 15%.
ï‚· A trading year consists of 365 days.
Required
Show all calculations rounded off to the closest rand ornearest whole number.
Use the information provided by Gentronics in order to determinethe impact of the proposed
relaxation in credit standards on profits.
Question 5 [45]
Gentronics (Pty) Ltd manufactures and sells a rechargeablebattery-operated lamp. The
company sells the lamps both for cash and on credit. Companymanagement is
contemplating relaxing its existing credit standards in order toboost sales and profits.
The company provided you with the following information relatingto this lamp:
ï‚· The current selling price is R150.00 per unit.
ï‚· Total sales for 2018 were 80 000 units.
The variable cost per unit is R80.00.
ï‚· The total fixed cost is R1 200 000.
ï‚· Current credit terms are 30 days from date of purchase.
ï‚· Current bad debts are 1% of sales.
ï‚· Owing to tough business conditions the company is consideringrelaxing its current credit
standards and in doing so, anticipates the following to happenas a result:
o An expected increase of 8% in current total sales
o An increase in the average collection period to 40 days
o An expected increase of 2% in bad debts
 The company’s opportunity cost of tying up funds in tradereceivables is 15%.
ï‚· A trading year consists of 365 days.
Required
Show all calculations rounded off to the closest rand ornearest whole number.
Use the information provided by Gentronics in order to determinethe impact of the proposed
relaxation in credit standards on profits.
Question 5 [45]
Gentronics (Pty) Ltd manufactures and sells a rechargeablebattery-operated lamp. The
company sells the lamps both for cash and on credit. Companymanagement is
contemplating relaxing its existing credit standards in order toboost sales and profits.
The company provided you with the following information relatingto this lamp:
ï‚· The current selling price is R150.00 per unit.
ï‚· Total sales for 2018 were 80 000 units.
The variable cost per unit is R80.00.
ï‚· The total fixed cost is R1 200 000.
ï‚· Current credit terms are 30 days from date of purchase.
ï‚· Current bad debts are 1% of sales.
ï‚· Owing to tough business conditions the company is consideringrelaxing its current credit
standards and in doing so, anticipates the following to happenas a result:
o An expected increase of 8% in current total sales
o An increase in the average collection period to 40 days
o An expected increase of 2% in bad debts
 The company’s opportunity cost of tying up funds in tradereceivables is 15%.
ï‚· A trading year consists of 365 days.
Required
Show all calculations rounded off to the closest rand ornearest whole number.
Use the information provided by Gentronics in order to determinethe impact of the proposed
relaxation in credit standards on profits.
Question 5 [45]
Gentronics (Pty) Ltd manufactures and sells a rechargeablebattery-operated lamp. The
company sells the lamps both for cash and on credit. Companymanagement is
contemplating relaxing its existing credit standards in order toboost sales and profits.
The company provided you with the following information relatingto this lamp:
ï‚· The current selling price is R150.00 per unit.
ï‚· Total sales for 2018 were 80 000 units.
The variable cost per unit is R80.00.
ï‚· The total fixed cost is R1 200 000.
ï‚· Current credit terms are 30 days from date of purchase.
ï‚· Current bad debts are 1% of sales.
ï‚· Owing to tough business conditions the company is consideringrelaxing its current credit
standards and in doing so, anticipates the following to happenas a result:
o An expected increase of 8% in current total sales
o An increase in the average collection period to 40 days
o An expected increase of 2% in bad debts
 The company’s opportunity cost of tying up funds in tradereceivables is 15%.
ï‚· A trading year consists of 365 days.
Required
Show all calculations rounded off to the closest rand ornearest whole number.
Use the information provided by Gentronics in order to determinethe impact of the proposed
relaxation in credit standards on profits.
