Essence of skunk fragrances., Ltd., sells 6,100 units of its perfume collection

Question

Essence of skunk fragrances., Ltd., sells 6,100 units of its perfume collection each year at a price per unit of $470. All sales on credit with terms of 3/10, net 40. The discount taken by 40 percent of the customers.

a. Average collection period (days)? round answer to 2 decimal places.

b. Receivable turnover (times)? use 365 days a year. do not round intermediate calculations and round your final answer to 3 decimal places.

c. Average receivables ($)? Do not round intermediate calculations and round your final answer to 2 decimal places.

Please clearly label each answer as a,b,c and provide work: thank you

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Explanation / Answer

a. Average collection period (days)? round answer to 2 decimal places.

Avg Collecton Period = 10days * 40% + 40 days * 60% = 28 Days

b. Receivable turnover (times)? use 365 days a year. do not round intermediate calculations and round your final answer to 3 decimal places.

Receivable turnover = 365/Avg Collecton Period = 365/28 = 13.036 times

c. Average receivables ($)? Do not round intermediate calculations and round your final answer to 2 decimal places.

Average receivables = Sales/365 * Avg Collecton Period = 2867000/365 * 28 = $ 219,934.25

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