Effect of Changed Terms on Augean Cleaning Products
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Until recently, Augean Cleaning Products sold its products on terms of net 60, with an average collection period of 75 days.
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Book for guidance: Operations Management for Competitive Advantage by Chase, Jacobs, & Aquilano
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Solution Summary
267 words and an Excel attachment show how to find the effects of changed terms on a cleaning product company given the relevant data.
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Until recently, Augean Cleaning Products sold its products on terms of net 60, with an average collection period of 75 days. In an attempt to induce customers to pay more promptly, it has changed its terms to 2/10, EOM, net 60. The initial effect of the changed terms is as follows:
Calculate the effect of the changed terms. Assume
? Sales volume is unchanged.
? The interest rate is 12 percent.
? There are no defaults.
? Cost of goods sold is 80 percent of sales.
Assumption of Sales ...
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