1. Now suppose each customer acts as follows: 10 percent pay in the month of sale, 40 percent pay in the month following the sales month, and 50 percent pay two months after the sale. What would be the impact of the change in customers' payment patterns on receivables balances, ACPs, aging schedules, uncollected balances schedules, and carrying costs of receivables at the end of March and June? Explain your results.
2. Suppose the company decides it needs to be more aggressive in collecting receivables to reduce carrying costs. In order to accomplish this, it contracts with a vendor to provide follow-up services for a quarterly cost of $500 per account (customer). a. If this strategy can accelerate 15 percent of the receivables from the 30–60 days period to the 0–30 days period, and 15 percent of the receivables from the 60–90 days period to the 30–60 days period, which customers should be targeted for follow-up services?
The answers are wanted in the form of explanations, not so much actual numbers.
End of March:
Receivables Balance: $353,550
Average Collection Period 42.4 Days
Aging Schedule:
0-30 days 80.8%
30-60 days 19.2%
60-90 days 0%
Uncollected Balance schedule:
January remaining rec / sales 0%
February remaning rec/ sales 27.1%
March remaining rec / sales 71.5%
Quarter remaining rec / sales 47.1%
Carrying Cost of receivables: $7,071
End of June:
Receivables Balance: $336,300
Average Collection Period 28.8 Days
Aging Schedule:
0-30 days 63.7%
30-60 days 36.3%
60-90 days 0%
Uncollected Balance schedule:
January remaining rec / sales 0%
February remaning rec/ sales 27.1%
March remaining rec / sales 71.5%
Quarter remaining rec / sales 24.9%
Carrying Cost of receivables: $6,726