Binder Inc's Credit Sales Are Projected to Be $11,680,000 for the Year

question 26

Multiple Choice

Binder Inc's credit sales are projected to be $11,680,000 for the year. The company collects its receivables over an average period of 50 days and finances them by borrowing on its bank line of credit at an interest rate of 9%. Management has determined that if it hires another clerk in the receivables department at $32,000 per year, it can reduce average days outstanding for the receivables to 30, the industry average. What should Binder Inc do?

• A) Hire the clerk and achieve a net savings of $86,400.
• B) Hire the clerk and achieve a net savings of $54,400.
• C) Do not hire the clerk as the net cost is $28,260.
• D) Do not hire the clerk as the net cost is $3,740.
• E) Hire the clerk and save $123,733.

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