Trinity Surgical Supplies, Inc. sells on terms of 2/10, net 30.Gross sales for the year are $1.5 million, and the collectionsdepartment estimates that 25 percent of the customers pay on thetenth day and take discounts; 50 percent pay on the thirtieth day;and the remaining 25 percent pay, on average, 40 days after thepurchase. (Assume 360 days per year.) a. What is the firm's averagecollection period? b. What is the firm's current receivablesbalance? c. What would be the firm's new receivables balance ifTrinity Surgical toughened up on its collection policy, with theresult that all nondiscount customers paid on the 30th day? d.Suppose that the firm's cost of carrying receivables was 10 percentannually. How much would the toughened credit policy save the firmin annual receivables carrying expense? (Assume that the entireamount of the receivables had to be financed.)
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