Essence of Skunk Fragrances Ltd. sells

Essence of Skunk Fragrances, Ltd., sells 7,100 units of its perfume collection each year at a price per unit of $510. All sales are on credit with terms of 1.5/10, net 60. The discount is taken by 45 percent of the customers.

Excel File

Note:

% are written as decimals

Key Facts

Units

7,100

Price Per Unit

510

Credit Terms

Discount

0.015

Days for Discount

10

Days for no discount

60

Customers who take discount:

0.45

A) What is the average collection period?

Need to determine the number of customers that take the discount and pay early, and the number of customers that do not.

Customers who take discount:

0.45

Customers with no discount

0.55

Days for Discount

10

Days for no discount

60

Discount

4.5

No Discount

33

Average Collection Period

37.5

B) What is the receivables turnover?

receivables Turnover = 365/Average collection Period

Receivables turnover:

9.733333333

C) What is the average account receivables?

Average Accounts Receivables = sales/receivables period

Sales:

3,621,000

(Units x Price)

Avg account receivables

372,020.55