> Doraville Inc. intends to reduce its collection by modifying the collection procedures. Its plan is expected to result in a lengthening of the average collection period from 28 days to 34 days; however, there will be no change in uncollectible accounts. The company's budgeted credit sales for the coming year are $27,000,000, and short-term interest rates are expected to average 8%. To make the changes in collection procedures cost beneficial, the minimum savings in collection costs (using a 360-day year) for the coming year would have to be

> Doraville Inc. intends to reduce its collection by modifying the collection procedures. Its plan is expected to result in a lengthening of the average collection period from 28 days to 34 days; however, there will be no change in uncollectible accounts. The company's budgeted credit sales for the coming year are $27,000,000, and short-term interest rates are expected to average 8%. To make the changes in collection procedures cost beneficial, the minimum savings in collection costs (using a 360-day year) for the coming year would have to be

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 33P

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ABC Co. is planning to introduce changes in its collection procedures. The new procedures are expected to make the collection period longer by 10 days, although there will be no change in bad debts. For the coming year, ABC Co's budgeted sales is P32,400,000 or P90,000 per day. Short-term interest rates are expected to average at 9% per annum. As a result of the changes in collection procedures, ABC Co.'s average Account Receivable balance will increase (decrease) by? To make the changes in collection procedures cost-beneficial, the minimum savings in collection costs for the coming year should be?
Lux Co. believes that its collection costs could be reduced through modification of collection procedures. This action is expected to result in a lengthening of the average collection period from 30 to 40 days; however, there will be no change in uncollectible accounts, or in total credit sales. Furthermore, the variable cost ratio is 65%, the opportunity cost of a longer collection period is assumed to be negligible, the company's budgeted credit sales for the coming year are P45,000,000, and the required rate of return is 5%. To justify changes in collection procedures, the minimum annual reduction of costs (using a 360-day year and ignoring taxes) must be
A proposed relaxation of credit standards of Bulldogs Inc. will increase the balance of accounts receivable by P95,000. The proposed relaxation will also increase the average collection period from 16 days to 3 weeks. How much is the increase in budgeted credit sales of Bulldogs Inc. if the firm increase the average collection period to 3 weeks? Use 360 days. 3,025,00 6,300,000 6,840,000 1,750,000
A proposed relaxation of credit standards of Mama Inc. will increase the balance of accounts receivable by P95,000. The proposed relaxation will also increase the average collection period from 16 days to 3 weeks. How much is the increase in budgeted credit sales of Mama Inc. if the firm increase the average collection period to 3 weeks? Use 360 days. 6,480,000 3,025,000 6,300,000 1,750,000
Pine Co. budgeted credit sales for the coming year is P900,000. A proposed relaxation of credit standards increase the Accounts receivable balance by P25,000. The average collection period is expected to increase from 20 to 25 days. How much is the budgeted credit sales of Pine Co. if the increase in average collection period to 25 days push through? (360 day year)a. 1,080,000b. 2,520,000c. 620,000d. 1,660,000
On accepting the position of chief executive officer and chairman of Reeves Machinery, Frank Cheney changed the firm’s weekly payday from Monday afternoon to the following Friday afternoon. The firm’s weekly payroll was $10 million, and the cost of short-term funds was 13%. If the effect of this change was to delay check clearing by 1 week, what annual savings, if any, were realized? Format: 1,111,111
The company’s budgeted sales for the coming year are P30,000,000 of which 70% are expected to be credit sales at terms of n/30. It estimates that a proposed relaxation of credit standards will increase credit sales by 30% and increase the average collection period from 20 days to 30 days. Based on a 360-day year, the proposed relaxation of credit to standards will result in an expected increase in the average accounts receivable balance of?
Thern Company's budgeted sales for the coming year are $40,500,000 of which 80% are expected to be credit sales at terms of n/30. Thern estimates that a proposes relaxation of credit standards would increase credit sales by 20% and increase the average collection period form 30 days to 40 days. Based on a 360-day year, the proposed relaxation of credit standards would result in an expected increase in the average accounts receivable balance of how much?
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