Wonder Dog Leash Company is examining their accounts receivable patterns. Wonder's customers are offered terms of 1/10 net 30. Of their receivables, $150,000 is current, $75,000 is 1 month overdue, $30,000 is two months overdue, and $20,000 is over two months overdue.
a. What proportion of Wonder's customers pay their bills on time?
b. What is the effective cost of Wonder's terms of trade credit?
c. What might happen to their receivables balance if they changed their terms to 1/15 net 30? To 2/10 net 30?