1. For this question, ignore the forecasted receivables collection pattern in Exhibit 27.4. Using paper and pencil (do NOT use the template), calculate the projected ACP and average daily sales (ADS) under the following conditions:

30% of customers pay on the 10th day

50% of customers pay on the 30th day

20% of customers pay on the 60th day

800,000 units sold per year @ $5 per unit = $4,000,000/360

Remember, since there are no balance sheets or operating statements, you will have to MANUALLY calculate the ACP. Just look at the numbers: 30% pay after 10 days + 50% pay after 30 days + 20% pay after 60 days. What’s the average? Voila! Also, for consistency, use 360 days = one year

Answer: ADS= $11,111 ACP= 33 days

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8. Based on the quarterly carrying costs of receivables, which customer contributes the most to these costs in both periods? Why? HINT: The reason is related to the combination of size and the promptness of payment.

Answer: The regional drug store accounts for only 17% of the sales mix forecast and is in collections for 30-90 days 80% of the time.

9. Assume the venture capitalists will ask some questions that can best be answered if you have done some sensitivity analyses of the effects of various inputs on the key outputs. For the next worksheet, assume that sales are a constant $400,000 per month and everything else remains the same as in the first worksheet. What would be the ACPs, the aging schedules, and the UBSs at the end of March and June? Discuss your results. Answer: The average collection periods would be the same for the end of Mach and June at 29.6 days. The aging schedules would also be the exact same for the end of March and June at 72.5% for 0-30 days, 27.5% 30-60 days, and 0% over 60 days. The uncollected balances schedule would also be the same for March and June at 0% for January remaining rec/sales, 27.1% for February remaining rec/sales, 71.5% March rec/sales, and 32.9% quarter remaining rec/sales.