Milwake Surgical Supplies, Inc.

Assignment No. 5 - Milwaukee Surgical Supplies, Inc. Marinella M. Ojeda Dr. Michelle Rose healthc be correct December 11, 2011 Milwaukee Surgical Supplies, Inc., sells on terms of 3/10, sack up 30. Gross sales for the year are $1,200.000 and the charms department estimates that 30% of the customers brook on the tenth daylight and dupe discounts, 40% deliver on the thirtieth day, and stay 30% settle, on fairish, 40 old age after the purchase. (Assume 360 geezerhood/year). 1. What is the watertight average collection period? Average collection formula: (Gapenski, 2008 pg.536) 30% pay on the 10 and take discount 40% pay on the 30 30% pay average 40 ACP = (0.3 x 10 days) + (0.4 x 30 days) + (0.3 x 40 days) 3 + 12 + 12 = 27 days 2. Calculate the firms let dues balance Receivables balance = ADB x ACP, where ADB = Average Daily Billi ng. I got the ADB dividing the Gross sales by the 360 days: $1,200.000 / 360 = $3,333.33 Receivables balance = $3,333.33 x 27 = $89,999.91 3. Calculate the firms new receivable if Milwaukee Surgical toughened up on its collection policy, with the mettle that all non-discount customer paid on the 30th day. 30% pay on the 10 and take discount 70% pay on the 30 ACP = (0.3 x 10 days) + (0.7 x 30 days) 3 + 21 = 24 days Receivables balance = ADB x ACP Receivables balance = $3,333.33 x 24 = $79,999.92 4. presume the cost to the firm to play receivables is 8% per annum; calculate the yearly savings resulting from the toughened credit policy. (Assume the integral amount of receivables had to be financed). Over a year the firm must pay to the bank: 0.08 x $79,999.92 = $6,399.99 in please group to carry its receivables balance. Now: $80,999 $79,999 = $10,000 x 0.08 = $800 With the first ACP this would be interest! to pay with $89,999.91 receivables balance 0.08 x $89,999.91 =...If you want to get a bountiful essay, order it on our website: OrderEssay.net

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