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A new financial manager at Wallace Company has proposed a change to the company's credit policy in order to lower the average collection period of
A new financial manager at Wallace Company has proposed a change to the company's credit policy in order to lower the average collection period of the customers who forgo the discount by days. The cost of the increased credit effort is $ million, and the manager estimates that the company will lose in gross sales as a result. The discount customers will not be affected.
The proposed data, including the daily data, is reflected in the following table.
tableExisting Policy,Proposed PolicyI General Credit Policy Information,,Credit terms, net net Average collection period ACP for all customers, days, daysACP for customers who take the discount days, daysACP for customers who forgo the discount days, daysII Annual Credit Sales and Costs $ millionsAmount paid by discount customers,$$
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