Milwaukee Surgical Supplies, Inc. sells on terms of 3/10, net 30. Net sales for the year are $1.2 million, and the collections department estimates that 30 percent of the customers pay on the tenth day and take discounts; 40 percent pay on the thirtieth day; and the remaining 30 percent pay, on average, 40 days after the purchase. (Assume 365 days per year.)

a. What is the firm's current accounts receivables?

b. What would be the firm's new accounts receivables if Milwaukee Surgical toughened up on its collection policy, with the result that all nondiscount customers paid on the 30th day?

c. Suppose that the firm's cost of carrying accounts receivables was 8 percent annually. How much would the toughened credit policy save the firm in annual receivables carrying expense? (Assume that the entire amount of the receivables had to be financed.)