Problems located in the back of Chapter 7 Show how you solved the problem. Make
Problems located in the back of Chapter 7 Show how you solved the problem. Make it very clear what problem you are answering + the letter. For example, problem 7.3 (a). Then, re-write each question. Thank you. Answer every question below. Problem 7.3 Fargo Memorial Hospital has annual patient service revenues of $14,400,000. It has two major third-party payers, and some of its patients are self-payers. The hospital’s patient accounts manager estimates that 10 percent of the hospital’s billings are paid (received by the hospital) on day 30, 60 percent are paid on day 60, and 30 percent are paid on day 90. a. What is Fargo’s average collection period? (Assume 360 days per year throughout this problem.) b. What is the hospital’s current receivables balance? c. What would be the hospital’s new receivables balance if a newly proposed electronic claims system resulted in collecting from third-party payers in 45 and 75 days, instead of in 60 and 90 days? d. Suppose the hospital’s annual cost of carrying receivables is 10 percent. If the electronic claims system costs $30,000 a year to lease and operate, should it be adopted? (Assume that the entire receivables balance has to be financed.) Problem 7.4 Milwaukee Surgical Supplies Inc. has gross sales for the year of $1,200,000. The collections department estimates that 30 percent of the customers pay on the tenth day, 40 percent pay on the thirtieth day, and the remaining 30 percent pay, on average, on the fortieth day after the purchase. (Assume 360 days per year.) a. What is the firm’s average collection period? b. What is the firm’s current receivables balance? c. What would the firm’s new receivables balance be if Milwaukee Surgical toughened up on its collection policy, resulting in the 70 percent of customers that did not pay by the tenth day paid on day 30? d . Suppose the firm’s cost of carrying receivables was 8 percent annually. How much would the toughened credit policy save the firm in carrying expenses for annual receivables? (Assume that the entire amount of receivables has to be financed.)