The company's operating cycle for Year 2 is closest to:

A) 95.9 days
B) 75.3 days
C) 162.0 days
D) 9.2 days

Question

The company's operating cycle for Year 2 is closest to:A) 95.9 daysB) 75.3 daysC) 162.0 daysD) 9.2 days

Katherine Buchanan · Accepted Answer

Final Answer : C, Explanation :  Inventory turnover = Cost of goods sold ÷ Average inventory*= $700,000 ÷ $176,500 = 3.97 (rounded)*Average inventory =($173,000 + $180,000)÷ 2 = $176,500Average sale period = 365 days ÷ Inventory turnover= 365 days ÷ 3.97 = 91.9 days (rounded)Accounts receivable turnover = Sales on account ÷ Average accounts receivable*= $1,290,000 ÷ $247,500 = 5.21 (rounded)*Average accounts receivable =($255,000 + $240,000)÷ 2 = $247,500Average collection period = 365 days ÷ Accounts receivable turnover= 365 days ÷ 5.21 = 70.1 days (rounded)Operating cycle = Average sale period + Average collection period= 91.9 days + 70.1 days = 162.0 days

The company's operating cycle for Year 2 is closest to:

A) 95.9 days
B) 75.3 days
C) 162.0 days
D) 9.2 days

Definitions

Learning Objectives

Learning Objectives

Related questions