Cash Collections and Discount Policy. The treasurer of John Loyde Co. plans for the company to have a cash balance of $91,000 on March 1. Sales during March are estimated at $900,000. February sales amounted to $600,000, and January sales amounted to $500,000. Cash payments for March have been budgeted at $580,000. Cash collections have been estimated as follows: 60 percent of the sales for the month to be collected during the month, 30 percent of the sales for the preceding month to be collected during the month, and 8 percent of the sales for the second preceding month to be collected during the month.

The treasurer plans to accelerate collections by allowing a 2 percent discount for prompt payment. With the discount policy, she expects to collect 70 percent of the current sales and will permit the discount reduction on these collections. Sales of the preceding month will be collected to the extent of 15 percent with no discount allowed, and 10 percent of the sales of the second preceding month will be collected with no discount allowed. This pattern of collection can be expected in subsequent months. During the transitional month of March, collections may run somewhat higher. However, the treasurer prefers to estimate collections on the basis of the new pattern so that the estimates will be somewhat conservative.

Estimate (a) cash collections for March and the cash balance at March 31 under the present policy, and (b) cash collections for March and the cash balance at March 31 according to the new policy of allowing discounts. (c) Is the discount policy desirable?