Viceroy Audio Ltd

Multiple Choice

Viceroy Audio Ltd. produces components for car, home and television stereo systems. The average collection period for receivables has been stable at 32 days and year-end Accounts Receivable at $656,000. With the onset of recession, customers have been slower to pay and the collection period has risen to 42 days. If the cost of capital to Viceroy Audio is 7% and sales are unchanged, what would the expansion of Accounts Receivable cost the company in a year?

A) $1,845
B) $2,422
C) $14,350
D) $59,040
E) $205,000