The following companies are trying to decide whether to change their accounts receivables collection policy. Required: Compute
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Required:
Compute the cost of the current receivables policy for each company.
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Three Rivers Industries Twin Peaks Ltd. Single Signals Inc. Current receivables policy Unit sale price Contribution margin per unit Units sold per year on credit Average collection period in days Bad debts per year Interest rate on line of credit $125 $ 50 120,000 72 $175,000 11% $250 $ 62 75,000 60 $149,000 7% $550 $140 25,000 100 $160,000 9% Proposed new receivables policy Revised average collection period in days Cost % reduction in unit sales 50 $89,000 10% 30 $45,000 7% 70 $60,000 4%
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Related Book For
Financial Management for Decision Makers
ISBN: 978-0138011604
2nd Canadian edition
Authors: Peter Atrill, Paul Hurley
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