Question
Galecki Inc. is considering bringing its credit policy in line with industry standards. The companys current policy is net 60 days and its average collection
Galecki Inc. is considering bringing its credit policy in line with industry standards. The companys current policy is net 60 days and its average collection period is also 60 days. Its proposed new policy is 2/10 net 45 days. Galecki has an available line of credit with its bank at an interest rate of 0.6% per month. If the company made sales on credit totalling $650,000 per month under each scenario, what is the additional opportunity cost to the company of the proposed credit policy on these sales? (Assume one month as 30 days, and all customers will take advantage of the discount.) a) $ 5,200 b) $ 6,500 c) $10,400 d) $14,300
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started