Assignment

Milwaukee Surgical Supplies, Inc., sells on terms of 3/10, net 30.

Gross sales for the year are $1,2000.000 and the collections department estimates that 30 percent of the customers pay on the tenth day and take discounts.

40 percent on the thirteenth day, and the remaining 30 percent pay, on average, 40 days after the purchase. (Assume 360 days per year)

a) What is the firm's average collection period (ACP)?

Customers/days/average collection period

b) What is the firm's current receivables balance (CRB)?

Average collection period = receivable / sales

c) What would be the firm's new receivables balance if Milwaukee Surgical toughened up on its collection policy, with the result that all non-discount customers paid on the 30th day?