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