McDowell Industries sells on terms of 3/10, net 30. Total sales for the year are $912,500. Forty percent of the customers pay on the 10th day and take discounts; the other 60 percent pay, on average, 40 days after their purchases.
a. What is the days sale outstanding?
b. What is the average amount of receivables?
c. What would happen to average receivables if McDowell toughened up on its collection policy with the result that all non-discount customers paid on the 30th day?