Super Sets, Inc. manufactures and sells television sets. All sales are finalized on credit with terms of 2/10, n/30. Seventy percent of Super Set customers take discounts and pay on day 10, while the remaining 30% pay on day 30. What is the average collection period in days?

Correct answer: (B)

The average collection period is 16 days, computed as:


Customers paying on day 10 = .70 x 10 days = 7 days average.

Customers paying on day 30 = .30 x 30 days = 9 days average.

Average collection period = 16 days


On average, 70% are outstanding for 10 days and 30% are outstanding for 30 days. By getting the weighted average of each group and summing them, the average collection period is determined.