15-16 Nantucket Nuts is evaluating whether to loosen its\ credit terms. With the current terms, annual sales\ are

$540,000

and the average collection period\ (DSO) is 38 days. With the new credit terms, sales\ are expected to increase to

$549,000

and the DSO\ would increase to 50 days. Nantucket's variable\ cost ratio is 80 percent and its average cost of\ funds is 13 percent. Should the change in credit\ terms be made? Assume all operating costs are\ paid at the time inventory is sold and all sales are\ collected at the DSO. (LO 15-4)

15-16 Nantucket Nuts is evaluating whether to loosen its credit terms. With the current terms, annual sales are $540,000 and the average collection period (DSO) is 38 days. With the new credit terms, sales are expected to increase to $549,000 and the DSO would increase to 50 days. Nantucket's variable cost ratio is 80 percent and its average cost of funds is 13 percent. Should the change in credit terms be made? Assume all operating costs are paid at the time inventory is sold and all sales are collected at the DSO. (LO 15-4)