McDowell Industries sells on terms of 3/10, net 30. All sales for the year are on credit amount to Ksh 912,500,000; 40% of the customers pay on the 10th day and take discounts, while the other 60%...

1. McDowell Industries sells on terms of 3/10, net 30. All sales for the year are on credit amount to Ksh 912,500,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 40 days after their purchases.

a. What is the percentage cost of trade credit to customers who do not take the discount and pay in 40 days?

b. What would happen to McDowell’s accounts receivable if it toughened up on its collection policy with the result that all non-discount customers paid on the 30th day?