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Last year, the sales of OSP Inc. Amounted to R5 million and its most recent...

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Accounting

Last year, the sales of OSP Inc. Amounted to R5 million and its most recent statement of financial position revealed trade receivables of R822000. All sales were on 30 days credit to customers. In order to encourage customers to pay in time, the management accountant of OSR Inc has proposed introducing an early settlement discount of 1% for payment within 30 days, while increasing its normal credit period to 45 days. It is expected that, on average, 60% of customers will take the discount and pay within 30 days. 30% of the customers will pay after 45 days, and the rest of the customers will not change their current paying behaviour, OSP Inc. Is charge interest of 12% per annum on its overdraft facility
Required:
Determine the net benefit (cost) of the proposed changes in trade receivables policy
A. Net cost of approximately R7000
B. Net benefit of approximately R 13000
C. Net cost of approximately R 13000
D. Net benefit of approximately R 7000

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