Fandango Company's Credit Terms Allow Its Customers to Pay Invoices

question 26

Multiple Choice

Fandango Company's credit terms allow its customers to pay invoices in 30 days. Practice has not followed policy and the collection period is at 45 days. If Fandango's receivables are $164,565 and the company can earn 12% on capital invested, what is the opportunity cost it is experiencing by not adhering to their collection policy?

• A) $19,747.80
• B) $6,582.60
• C) $13,165.20
• D) $61,437.60
• E) $8,776.80

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Definitions:

Cost-benefit Constraint

A principle that considers whether the cost of implementing a decision outweighs the benefits derived from it.

Disclosure

The process of making essential financial information known to shareholders, regulators, and the public.

Benefits

Various forms of value, such as health insurance and retirement plans, provided to employees in addition to their salaries.

Cost-benefit Constraint

A principle in decision-making and economics that suggests actions or decisions should only be taken if the benefits outweigh the costs.