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Alexis Enterprises, an importer and exporter of precious metals and jewelry from around the world, sells its objets d'art to stores in six eastern states
Alexis Enterprises, an importer and exporter of precious metals and jewelry from around the world, sells its objets d'art to stores in six eastern states and generates annual sales of $ In response to increasing concerns regarding the firm's slow collections and elevated baddebt ratios, Alexis's treasurer has suggested that the firm change its current collection policy. Specifically, he proposes that the firm progress beyond its current collection efforts sending latepayment notices and making followup telephone callsand hire an outside professional collection agency. It is expected that the collection agency will cost $ and that the firm's sales and inventory requirements will be unaffected by the policy change.
To facilitate the evaluation of this proposal, the treasurer has had his assistant, Abigail, collect the following information and has asked you to determine whether or not Alexis should revise its collection policy:
tableCurrent Credit Data,Forecasted Data for Revised Collection PolicyDays sales outstanding DSO days,Days sales outstanding DSO daysBaddebt losses of sales,Baddebt losses of salesContribution margin Return earned on any freed funds
Given this data and assuming that the revised collection policy is implemented, completc the following statements. Note: Round your answers to the nearest dollar.
Alexis's accounts receivable investment is expected to change by
B The marginal income earned on any freed funds is expected to be $
C The change in the firm's baddebt losses is forecast to be $
D The expected net benefit associated with the revised policy is
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