Accounts receivale collecetion period and discount kitkat

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Reference no: EM13468550

KitKat tools are considering offering a cash discount to speed up the collection of accounts receivable. Currently, the firm has an average collection period of 65 days, annual sales are 35,000 units, per unit price is $40 and the per-unit variable cost is $29. A 2% discount is being considered. The firm estimates that 80% of its customers will take up the discount. If sales are expected to rise to 37,000 units per year and the firm has a 15% required rate of return, what minimum average collection period is required to approve the cash discount plan?

Reference no: EM13468550

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