16.5 Milwaukee Surgical Supplies, Inc., sells on terms of 3/10, net 30. Gross sales for the year are $1,200,000 and the collections department estimates that 30 percent of the customers pay on the tenth day and take discounts, 40 percent on the thirtieth day, and the remaining 30 percent pay, on average, 40 days after the purchase. (Assume 360 days per year)
a) What is the firm’s average collection period (ACP)?
ACP (Average Collection Period) = (number of billings x day of billings) + (number of billings x day of billings) = days (ACP).
b) What is the firm’s current receivables balance (CRB)?
Current receivables balance (CRB) =Average Daily Billing (ABD) x Average Collection Period (ACP)
c) What would be the firm’s new receivables balance if Milwaukee Surgical toughened up on its collection policy, with the result that all non-discount customers paid on the 30th day?
The Receivables balance = Average daily sales (ADS) x Average Collection Period (ACP)
d) Suppose that the firm’s cost of carrying receivables was 8 percent annually. How much would the toughened credit policy save the firm in annual receivables carrying expense? (Assume that the entire amount of receivables had to be financed.)
Step 1: Old Carrying Receivables at 8 % = (Percent Annually) x (Old Receivables Balance)
Step 2: New Carrying Receivables at 8 % = (Percent Annually) x (New Receivables Balance)
Step 3: Carrying Expense Saved = (Old Receivables Balance – New Receivables Balance)
I just need part D.
We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.Read more
The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.Read more
The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.Read more
By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.Read more