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Miranda Tool Company sells to retail hardware stores on credit terms of “net 30.” Annual credit sales are $18 million and are spread evenly throughout the year. The company’s variable cost ratio is 0.70, and its accounts receivable average$1.9 million. Using this information, determine the following for the company:
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a. Average daily credit sales
b. Average collection period
c. Average investment in receivables
Assume there are 365 days per year.
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Solution Preview
a. Average daily credit sales = Annual sales/360=(18000000/365)= $49315
b. Average …
