Suppose that LilyMac Photography has annual sales of $321,000, cost of goods sol

Question

Suppose that LilyMac Photography has annual sales of $321,000, cost of goods sold of $161,000, average inventories of $4,100, and average accounts receivable of $24,600. Assume that all of LilyMac’s sales are on credit.

What will be the firm’s operating cycle? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places.)

Suppose that LilyMac Photography has annual sales of $321,000, cost of goods sold of $161,000, average inventories of $4,100, and average accounts receivable of $24,600. Assume that all of LilyMac’s sales are on credit.

Explanation / Answer

Operating cycle = [(Inventory × 365 days) / Cost of goods sold] + [(Accounts receivable × 365 days) / Credit sales]

= [($4,100 × 365 days) / $161,000] + [($24,600 × 365 days) / $321,000]

= 37.27 days

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