XYZ Co sells television sets throughout Western Canada. The current credit policies being offered are 2/10, net 30 and the new policy being considered is 4/10, net 50. Currently 40% of customers take advantage of the discount policy. Assume no bad debt and the remaining customers pay within 30 days. With the change in policy, the annual sales would increase from $200,000 to $260,000. The increased sales would also affect inventory levels. The average inventory carried is based on EOQ. Assume unit sales will increase from 20,000 to 25,000 units. The ordering cost per order is $100 and the carrying cost per unit is $1.00. Each unit in inventory has an average cost of $6.50. Cost of Goods Sole is = 65% of net sales, general and admin expenses are = 10% of net sales, and interest payments of 12% will be necessary only for the increase in AR and Inventory balances. Taxes = 25%. A) Compute the Average Collection period and AR balance before and after the change in the discount policy. Use net sales (Total sales - cash discounts) to determine the average daily sales and AR balances. B) 

Determine EOQ before and after the change.