Morrissey Industries sells on terms of 3/10, net 30. Total sales for the year are $900,000. Forty percent of the customers pay on Day 10 and take discounts; the other 60 percent pay, on average, 40 clays after their purchases.
a. What is the days sales outstanding?
b. What is the average amount of receivables?
c. What would happen to average receivables if Morrissey tightened its collection policy with the result that all non-discount customers paid on Day 30?