Barans Company currently has an average collection period of 55 days and annual

Question

Barans Company currently has an average collection period of 55 days and
annual sales of $1 billion. Assume a 365-day year.
a. What is the firm's average accounts receivable balance?
b. if the variable cost of each product is 65% of sales, what is the average investment in accounts receivable ?
c. if the equal-risk opportunity cost of the investment in accounts receivable is 12%, what is the total annual cost of the resources invested in accounts receivable?


PLEASE I NEED CALCULATION FOR LETTER A, B AND C

STEP BY STEP PLEASE IF YOU DONT KNOW DONT ANSWER THANKS

Explanation / Answer

a. average collection period= (365x Average amount of accounts receivables)/Credit sales 55= (365xAverage amount of accounts receivables)/1billion Average amount of accounts receivables= .150684931 billion. b. Accounts receivable turnover: 360/55 = 6.5455 Average accounts receivable balance = credit sales / turnover = 1billion/6.5455= .152778 billion c. total annual cost of the resources invested in accounts receivable= .12x .152778= $.01833 billion

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