1. The Dog House expects sales of $560, $650, $670, and $610 for the months of M

Question

1. The Dog House expects sales of $560, $650, $670, and $610 for the months of May through August, respectively. The firm collects 20 percent of sales in the month of sale, 70 percent in the month following the month of sale, and 8 percent in the second month following the month of sale. The remaining 2 percent of sales is never collected. How much money does the firm expect to collect in the month of August?

2. West Chester Automation has an inventory turnover of 16 and an accounts payable turnover of 11. The accounts receivable period is 36 days. What is the length of the cash cycle?

Explanation / Answer

Part B)

Cash cycle = (365/16) + 36 - (365/11) = 25.63 days.

May June Jul Aug 560 650 670 610 Current month 112 130 134 122 Following month 392 455 469 Second month 44.8 52 Total collection 112 522 633.8 643

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