Can some one please explain it to me...Thanks! Its from Becker.
Question CPA-04092
The following information regarding a change in credit policy was assembled by the Wilson Wax Company. The company has a required rate of return of 10 percent and a variable cost ratio of 60 percent.
Old Credit Policy New Credit Policy
Sales $3,600,000 $3,960,000
Average collection period 30 days 36 days
The pretax cost of carrying the additional investment in receivables, using a 360-day year, would be:
a. $5,760
b. $9,600
c. $8,160
d. $960
Explanation
Choice "a" is correct.