29.2 The Webster's Company sells on credit terms of net 45. Its accounts are on average 45 days past due. If annual credit sales are $5 million, what is the company's balance in accounts receivable? 29.3 The Tropeland Company has obtained the following information: Annual credit sales = $30 million Collection period = 60 days Terms: Net 30 Interest rate = 12% The company is considering offering terms of 4/10, net 30. It anticipates that 50 percent of its customers will take advantage of the discount. The collection period is expected to decrease by one month. Should the new credit policy be adopted? 29.4 Berkshire Sports, Inc., operates a mail-order running-shoe business. Management is considering dropping its policy of no credit. The credit policy under consideration by Berkshire follows: No Credit Credit Price per unit $35 $40 Cost per unit $25 $32 Quantity sold 2,000 3,000 Probability of payment 100% 85% Credit period 0 1 Discount rate 0 3% a. Should Berkshire offer credit to its customers? b. What must the probability of payment be before Berkshire would adopt the policy? 29.7 The Silver Spokes Bicycle Shop has decided to offer credit to its customers during the spring selling season. Sales are expected to be 300 cycles. The average cost to the shop of a cycle is $240. The owner knows that only 95 percent of the customers will be able to make their payments. To identify the remaining 5 percent, she is considering subscribing to a credit agency. The initial charge for this service is $500, with an additional charge of $4 per individual report. Should she subscribe to the agency? 29.11 The Allen Company has monthly credit sales of $600,000. The average collection period is 90 days. The cost of production is 70 percent of the selling price. What is the Allen Company's average investment in accounts receivable?
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