Sanders' Prime Time Lighting Co. has credit sales of $1,836,000 and accounts receivable of $224,400. Compute the value for theaverage collection period. (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to thenearest whole number.)Average collection perioddays Sanders' Prime Time Lighting Co. has credit sales of $1,836,000 and accounts receivable of $224,400. Compute the value for theaverage collection period. (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to thenearest whole number.)Average collection perioddays

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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.) O No O Yes

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.) O No O Yes

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Shannon's currently boasts a customer base of 1,750 customers that frequent the brewhouse on average twice per month and spend $30 per visit. Shannon 's current variable cost of goods sold is 50% of sales. The customer base is growing at the rate of 3% per month with a customer retention rate of 0.73%, based on data collected from its website and an analysis of credit card receipts. It's current cost of capital for borrowing and investing is about 12% per year. What is Shannon's approximate CLV for its average customer? Compute your answer to the nearest penny.
Soler Inc. wishes to speed up collection of its receivables. Soler currently offers credit terms of net 30. It is considering changing to terms of 2/10 net 20. The collection period is expected to be reduced from 40 to 25 days. The percentage of customers paying within the discount period is expected to be 60 percent. Bad debt losses average 6 percent of sales and are expected to decrease to 5 percent under the proposed policy. The inventory level is expected to increase by $300,000. Annual billings are $50 million. The variable cost ratio is 75 percent. The pretax return on funds made available by this change in policy is 6 percent. Assuming the change in terms is made; determine the net effect on Soler’s pretax profits.
Dodge Ball Bearings had sales of 16,000 units at $50 per unit last year. The marketing manager projects a 35 percent increase in unit volume sales this year with a 10 percent price decrease (due to a price reduction by a competitor). Returned merchandise will represent 9 percent of total sales. What is your net dollar sales projection for this year? Net sales
The Milton Company currently purchases an average of $18,000 per day in raw materials on credit terms of "net 25." The company expects sales to increase substantially next year and anticipates that its raw material purchases will increase to an average of $22,000 per day. Milton feels that it may need to finance part of this sales expansion by stretching accounts payable. Round your answers to the nearest dollar. Assuming that Milton currently waits until the end of the credit period to pay its raw material suppliers, what is its current level of trade credit? $ If Milton stretches its accounts payable an extra 5 days beyond the due date next year, how much additional short-term funds (that is, trade credit) will be generated? $
S Global Services is considering a promotional campaign that will increase annual credit sales by $450,000. 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 6 1 All $450,000 of the sales will be collectible. However, collection costs will be 6 percent of sales, and production and selling costs will be 71 percent of sales. The cost to carry inventory will be 4 percent of inventory. Depreciation expense on plant and equipment will be 5 percent of plant and equipment. The tax rate is 30 percent. Accounts receivable Inventory a. Compute the investments in accounts receivable, inventory, and plant and equipment based on the turnover ratios. Add the three together. Plant and equipment Total Investment times times time b. Compute the accounts receivable collection costs and production and selling costs and add the two figures together. Collection cost…
Peanut Inc. is evaluating whether to change its credit terms from 2/10 net 30 to 3/10 net 30. At present, 50% of Peanut's sales are paid at day 10. Regardless of the credit terms, half of the customers who do not take the discount are expected to pay on day 30 whereas the remainder will pay 15 days late (no bad debts exist). But as a result of the higher cash discount offered with the new terms, sales are expected to increase from 757,000 to 801,000 per year. Peanut's variable cost ratio is 75% and its cost of funds is 8.7%. All production costs are paid on the day of the sale. Should the change be made?
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