4. value: 10.00 points Essence of Skunk Fragrances, Ltd., sells 8,400 units of i

Question

4. value: 10.00 points Essence of Skunk Fragrances, Ltd., sells 8,400 units of its perfume collection each year at a price per unit of $550. All sales are on credit with terms of 2.5/10, net 60. The discount is taken by 65 percent of the customers. Calculate the average collection period. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Average collection days What is the receivables turnover? (Use 365 days a year. Do not round intermediate calculations and round your answer to 3 decimal places, e.g, 32.161.) ceivables turnover times What is the amount of the companys average receivables? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places. e.g., 32.16) Average receivables References eBook & Resources Worksheet

Explanation / Answer

a.) Average Collection Period = % Customers Availing Discount x Discount Period + % Not Availing Discount x Payment Overdue Days

                                     = 0.65 x 10 + 0.35 x 60

                                     = 6.50 + 21.00

                                     = 27.50 days

b.) Receivales Turnover =365/Average Collection Period = 365/27.50 =13.27

c.) Total Credit Sales =$8,400 x 550 =$4,620,000

Average Receivables =Credit Sales/Receiables Turnover

                              = 4,620,000/13.27

                              =$348,153.73

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