Suppose that LilyMac Photography has annual sales of $321,000, cost of goods sol
ID: 2782487 • Letter: S
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