J&J Production Inc. has annual sales of $30 million and accounts receivables of $1.5 million. They have an inventory turnover of 4. How long is J &J's operating cycle? (Assume a 360-day year)

A) 18 days
B) 90 days
C) 108 days
D) 72 days

Question

lurvin macias · Accepted Answer

Final Answer : C, Explanation :  Operating cycle = Inventory conversion period + Accounts receivable collection periodInventory turnover = Cost of goods sold / Inventory4 = Cost of goods sold / InventoryInventory = Cost of goods sold / 4Inventory conversion period = Inventory / Cost of goods sold x 360Inventory conversion period = (Cost of goods sold / 4) / Cost of goods sold x 360Inventory conversion period = 90 daysAccounts receivable collection period = Accounts receivable / Annual credit sales x 360Accounts receivable collection period = 1.5 million / 30 million x 360Accounts receivable collection period = 18 daysOperating cycle = Inventory conversion period + Accounts receivable collection periodOperating cycle = 90 days + 18 daysOperating cycle = 108 days

J&J Production Inc. has annual sales of $30 million and accounts receivables of $1.5 million. They have an inventory turnover of 4. How long is J &J's operating cycle? (Assume a 360-day year)

A) 18 days
B) 90 days
C) 108 days
D) 72 days

Definitions

Learning Objectives

Learning Objectives

Related questions

J&J Production Inc. has annual sales of $30 million and accounts receivables of $1.5 million. They have an inventory turnover of 4. How long is J &J's operating cycle? (Assume a 360-day year) A) 18 daysB) 90 daysC) 108 daysD) 72 days

Definitions

Learning Objectives

Learning Objectives

Related questions

J&J Production Inc. has annual sales of $30 million and accounts receivables of $1.5 million. They have an inventory turnover of 4. How long is J &J's operating cycle? (Assume a 360-day year)

A) 18 days
B) 90 days
C) 108 days
D) 72 days