Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Sanders' Prime Time Lighting Co. has credit sales of $1,836,000 and accounts receivable of $224,400. Compute the value for the average collection period. Use 365
Sanders' Prime Time Lighting Co. has credit sales of $1,836,000 and accounts receivable of $224,400. Compute the value for the average collection period. Use 365 days in a year. Do not round intermediate calculations. Round the final answer to the nearest whole number.) Average collection period days Tobin Fisheries currently sells to its customers on terms of 2/11, net 31. Its average collection period is 14 days, with 85 percent currently taking the discount. All sales are credit sales. Upper management has expressed concern about sluggish sales, and the marketing department would like a more attractive credit package. Next year's sales are projected to be $2.70 million. It has been estimated that with terms of 3/11, net 65 , sales next year would jump to $3.70 million and 65 percent of sales would take the discount, but the average collection period would increase to 31 days. Tobin's contribution margin of 5 percent would hold with the expansion of sales, as would its short-term financing cost of 11 percent. Should Tobin initiate the change in credit policy? (Use 365 days in a year.)
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