6. Receivables investment

McDowell Industries sells on terms of 3/10, net 40. Total sales for the year are $912,500; 40

percent of the customers pay on the 10th day and take discounts, while the others 60 percent

pay, on average, 40 days after their purchases.

a) What is the average collection period (ACP) ?

b) What is the average amount of receivables?

c) What is the percentage cost of trade credit to customers who take the discount and to

those who do not take it?