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To analyze whether Alpha Ltd. should relax its credit policy, we need to examine the financial implications of the proposed change on sales, costs, and the investment in accounts receivable, using the working capital management perspective. We will calculate the current profit, incremental profit from additional sales, and the cost of additional receivables, and then determine whether the net effect is positive. Current Situation: Alpha Ltd. currently sells 20,000 units at Rs. 100 each, generating total sales revenue of: [ 20,000 \times 100 = 2,000,000 \text{ Rs.} ] The variable cost per unit is Rs. 88, so total variable cost is: [ 20,000 \times 88 = 1,760,000 \text{ Rs.} ] The contribution margin per unit is: [ \text{Price} - \text{Variable cost} = 100 - 88 = 12 \text{ Rs. per unit.} ] The total contribution margin for 20,000 units is: [ 12 \times 20,000 = _______ ____ _____ ___ _____.
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