Note: When converting annual data to daily data or vice versa in these problems, assume there are 365 days per year.
Problem 1
Miranda Tool Company sells to retail hardware stores on credit terms of “net 30”. Annual credit sales are $18 million and are spread evenly throughout the year. The company’s variable cost ratio is 0.70, and its accounts receivable average $1.9 million. Using this information, determine the following for the company:
a. Average daily credit sales
b. Average collection period
c. Average investment in receivable