1.Taylor Glass has annual sales of $1,750,000. Although it extends credit for 30 days (n30), the receivables are 20 days overdue. What is the average accounts receivable outstanding, and how much could the company save in interest expense if customers paid on time and if it costs Taylor, Glass 10 percent to carry its receivables?
2. To increase sales, management is considering reducing its credit standards. This action is expected to increase sales by $125,000. Unfortunately, it is anticipated that 7 percent of the sales will be uncollectible. Accounts receivable turnover is expected to be six times a year, and it costs the firm 10 percent to carry its receivables. Collection costs will be 4 percent of sales, and the cost of the additional goods sold is $64,000. Will earnings increase?