1.
a.
30 days until account overdue; remittance = $12,000 b.
3% discount; 10 day discount period; remittance= $11,640 c.
implicit interest= $360; 30 – 10 = 20 days credit
2.
Receivables turnover = 5.21428571 times
Average receivables = $17,260,274
3.
a.
ACP = 18 days b.
Average balance = $1,562,301.37
4.
Average accounts receivable = $99,726
5.
Nominal interest rate = 0.0204 for 37 days
EAR = 22.05% a.
.03/.97 = .03093; EAR = 35.05% b.
EAR = 15.24% c.
EAR = 27.86%
6.
Receivables turnover = 5.9836066 times
Annual credit sales = $239,344.26
7.
Total credit sales = $1,200,000
ACP = 20 days
Receivables turnover = 18.25 times
Average receivables = $65,753.42
If the firm increases the cash discount, then more people will pay sooner, thus lowering the average collection period. If the ACP declines, receivables turnover increases, which will lead to a decrease in average receivables.
8.
ACP = 32 days
Receivables turnover = 11.40625 times
Receivables = $526,027.40
11.
Carrying costs = $40,000
Order costs = $57,200
EOQ = 2,391.65
The firm’s policy is not optimal, since the costs are not equal. The company should increase the order size and decrease the number of orders.
12.
Carrying costs = $3,825
Restocking costs = $2,496
EOQ = 137.33

Number of orders per year = 64.37 times
The firm’s policy is not optimal, since the costs are not equal. The company should decrease the order size and increase the number of orders.
13.
Carrying costs = (Q/2)

CC ; restocking costs = F

(T/Q)
CC

(Q/2) = F

(T/Q)
Q
2
= 2

F

T /CC
Q = [2F

T /CC]1/2 = EOQ
19.
The company places an order every five days. Number of orders per year = 365/5
= 73 times.
If an order was received before the store opened on Monday, then Monday should be included in the day count required to determine the next point in time to reorder. The next order should be placed five days later which would normally be after the close of business on Friday. If the supplier is not open on Friday evening and assuming that the supplier is not open on the weekend, the order should be placed just before the close of business on Friday.