Please show all work for this assignment and explain your derivations. Lack of s
ID: 455478 • Letter: P
Question
Please show all work for this assignment and explain your derivations. Lack of step by step work will not be credited. Partial credit will be given for step by step description of answer(s). Calculation: In the month of January, Reliance® Auto sold 60 vehicles and had account receivable of $160,000.00. If a vehicle costs $40,000, account payable is $240,000 and the cost of sales is 72%, and the current value of total inventory is $500,000.00, Calculate;
The average daily sales
The average days of accounts receivable
The average daily cost of sales
The average days of inventory
Cash to cash cycle time
Explanation / Answer
Average daily sales = Sales / 365 days
sales = 60 X $ 40,000
sales = $ 2,400,000
Average daily sales = $ 2,400,000 / 365
Average daily sales = $ 6,575.34
Average days of accounts receivable = Average accounts receivables / average daily sales
Average accounts receivables = $160,000.00/ 365 days
Average accounts receivables = $ 438.356
Average days of accounts receivable = $ 6,575.34 / $ 438.356
Average days of accounts receivable = 15 days
average daily cost of sales = Annual cost of sales / 365 days
Annual cost of sales = 72% X 500,000.00
Annual cost of sales = $ 360,000
average daily cost of sales = $ 360,000 / 365 days
average daily cost of sales = $ 986.30
average days of inventory = 365 days / Inventory turnover ratio
Inventory turnover ratio = cost of sales / average inventory
Inventory turnover ratio = $ 360,000 / $ 500,000/2
Inventory turnover ratio = 1.44
average days of inventory = 365 / 1.44
average days of inventory = 253.47
Cash to cash cycle time = average days of accounts receivable + average days of inventory - average days of accounts payable
average days of accounts payable = accounts payable / average purchases per day
average purchases per day = $ 360,000 / 365 days
average purchases per day = $ 986.30
average days of accounts payable = 243.33
Cash to cash cycle time = 15 days + 253.47 days - 243.33 days
Cash to cash cycle time = 25 days .
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