Klein's Tools is considering offering a cash discount to speed up the collection of accounts receivable. Currently the firm has an average collection period of 66 days, annual sales are 36,000 units, the per-unit price is $37, and the per-unit variable cost is $26. A 3% cash discount is being considered. Klein's Tools estimates that 78% of its customers will take the 3% discount. If sales are expected to rise to 38,000 units per year and the firm has a 15% required rate of return, what minimum average collection period is required to approve the cash discount plan? The minimum average collection period required to approve the cash discount plan is days. (Round to two decimal places.)

Global Services is considering a promotional campaign that will increase annual credit sales by $590,000. The company will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows:           Accounts receivable 5 times Inventory 8 times Plant and equipment 4 times        All $590,000 of the sales will be collectible. However, collection costs will be 5 percent of sales, and production and selling costs will be 70 percent of sales. The cost to carry inventory will be 8 percent of inventory. Depreciation expense on plant and equipment will be 20 percent of plant and equipment. The tax rate is 35 percent.a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios. Add the three together.          b. Compute the accounts receivable collection costs and production and selling costs and then add the two figures together. c. Compute the costs of carrying inventory.…

Global Services is considering a promotional campaign that will increase annual credit sales by $650,000. The company will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: Accounts receivable Inventory Plant and equipment 2 times 4 times 2 times All $650,000 of the sales will be collectible. However, collection costs will be 6 percent of sales, and production and selling costs will be 76 percent of sales. The cost to carry inventory will be 4 percent of inventory. Depreciation expense on plant and equipment will be 10 percent of plant and equipment. The tax rate is 35 percent. a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios. Add the three together. Accounts receivable Inventory Plant and equipment Total Investment

Inc. currently fills mail orders from all over the country and receipts were received in its head office.  The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10%  interest. Inc. is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%.  The annual cost of the lockbox system is P25,000.  What is the estimated net annual savings in implementing the lockbox system?   P28,455P22,985P25,750P21,875

Apollo Data Systems is considering a promotional campaign that will increase annual credit sales by $528,000. The company has a 60% cost of goods sold and will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: Accounts receivable Inventory Plant and equipment 5x 8x 2x All $528,000 of the sales will be collectible. However, collection costs will be 4 percent of sales, and production and selling costs will be 78 percent of sales. The cost to carry inventory will be 10 percent of inventory. Amortization expense on plant and equipment will be 5 percent of plant and equipment. The tax rate is 30 percent. Inventory is calculated using cost of goods sold and not sales. a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios. What is the total value of the investment made? Accounts receivable Inventory Plant and equipment Total Investment $ $ $ b. Compute the accounts…

RAF is currently makes all sales on credit and offers no cash discount. The firm is considering offering a 2% cash discount for payment within 15 days. The firm’s current average collection period is 60 days, sales are 40,000 units, selling price is $45 per unit, and variable cost per unit is $36. The firm expects that the change in credit terms will result in an increase in sales to 42,000 units, that 70% of the sales will take the discount, and that the average collection period will fall to 30 days. If the firm’s required rate of return on equal-risk investments is 25%, should the proposed discount be offered? (Note: Assume a 360-day year.)

Apollo Data Systems is considering a promotional campaign that will increase annual credit sales by $600,000. The company has a 40% cost of goods sold and will require Investments in accounts receivable, Inventory, and plant and equipment. The turnover for each is as follows: Accounts receivable Inventory Plant and equipment All $600,000 of the sales will be collectible. However, collection costs will be 3 percent of sales, and production and selling costs will be 77 percent of sales. The cost to carry Inventory will be 6 percent of Inventory. Amortization expense on plant and equipment will be 7 percent of plant and equipment. The tax rate is 30 percent. Inventory is calculated using cost of goods sold and not sales. a. Compute the investments in accounts receivable, Inventory, and plant and equipment based on the turnover ratios. What is the total value of the Investment made? Accounts receivable Inventory Plant and equipment Total Investment Collection cost Production and selling…

Worthington Company expects that cash sales will be 20% of total sales, credit card sales will be 50% of total sales, and account sales will be 30% of total sales. Credit card sales are collected in the month following the sale, net a 3% credit card fee. This means that if the sale is $100, the credit card company's fee is $3, and Worthington receives $97. Account sales will be collected as follows: 40% in the first month following the sale, 50% in the second month following the sale, 8% in the third month following the sale, and 2% never collected. The following table identifed the projected sales for the first year of operations: Month Sales Month January $12,369,348 July Sales $21,747,839 February 15,936,293 August 14,908,534 March 13,294,309 September 11,984,398 April 19,373,689 October 18,894,535 May 20,957,566 November 21,983,545 June 18,874,717 December 20,408,367 Complete the following statement showing the cash expected each month from the collections of these sales. Round all…

Sunny Manufacturing is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $220,000 if credit is extended to these new customers. Of the new accounts receivable generated, 10 percent will prove to be uncollectible. Additional collection costs will be 5 percent of sales, and production and selling costs will be 70 percent of sales. a. Compute the incremental income before taxes. $ Incremental income before taxes b. What will the firm's incremental return on sales be if these new credit customers are accepted? (Round the final answer to 2 decimal place.) Incremental return on sales % c. If the receivable turnover ratio is 4 to 1, and no other asset buildup is needed to serve the new customers, what will Sunny Manufacturing's incremental return on new average investment be? (Do round intermediate calculations. Round the final answer to the nearest whole percentage.) Incremental return on new average investment %

Panda Co. is planning to change its collection policies that will change the collection period from 5 days to 10 days. The daily projected credit sales for the upcoming year of the company is P40,000. Prevailing rates are expected at 3%. To make the change in collection policy cost-beneficial, the minimum savings in collection cost for the coming year should be?