Problem 1: Given the following information, calculate the firm’s annual cost of resources in accounts receivable:
ACP = 20.2 days
Annual Sales = $450,000
Variable cost ratio of 49%
Required return = 12%
a. $1,464
b. $12,395
c. $5,835
d. $8,236
e. $3,183
Question 2:
Burnt Amber Corp. (BAC) forecasts monthly sales as follows:
Month Sales (in millions)
April $12.4
May $13.5
June $13.0
July $14.2
99% of receivables are collected, with 1% written off as bad debts. BAC’s historical collection pattern, which is expected to continue in the future, is to collect 15% of sales in the month of sale, 66% in the month following the sale, and 18% in the second month following the sale. What is a predicted amount for the total dollar collections in June?
a. $12.40 million
b. $12.87 million
c. $13.09 million
d. $13.11 million
e. $13.16 million