WEEK 3: A company collects 60% of its sales during the month of the sale, 30% one month after the sale,

| March 14, 2016

Per the instructor’s policies, calculations (on how answers were derived) must be shown for

each of the problems (1-10) below. See Instructor Announcements for sample submission document

1) A company collects 60% of its sales during the month of the sale, 30% one month after the sale, and 10% two months after the sale. The company expects sales of $10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in November. How much money is expected to be collected in October?

A) $25,000

B) $15,000

C) $35,000

D) $95,000

2) Brewhouse had sales in November of $60,000, in December of $40,000, and in January of $80,000. Brewhouse collects 40% of sales in the month of the sale and 60% one month after the sale. Calculate Brewhouse’s cash receipts for January.

A) $44,000

B) $56,000

C) $64,000

D) $72,000

3) Your firm is trying to determine its cash disbursements for the next two months (June and July). In any month, the firm makes purchases of 60% of that month’s sales, which are paid the following month. In addition, the firm incurs the following costs every month and pays for them in the month the expenses are incurred: wages/salaries of $10,000, rent of $4,000, and miscellaneous cash expenses of $1,000. Depreciation amortized on a monthly basis is $2,000. June’s sales are expected to be $100,000, and July’s sales are expected to be $150,000. Cash disbursements for the month of July are expected to be

A) $105,000.

B) $107,000.

C) $77,000.

D) $75,000.

4) Jason’s balance in accounts receivable is $240,000. Annual credit sales are $2,880,000. Jason’s average collection period is:

A) 12 days.

B) 30.4 days.

C) 2.5 days.

D) 19 days

5) Larry and Dave’s has a Cost of Goods Sold of $60.8 million. The company’s accounts payable balance is $7.5 million. It’s accounts payable deferral period is:

A) 81 days.

B) 45 days.

C) 8.11 days.

D) 48.7 days.

6) SuperWave has an average collection period of 49 days, an inventory conversion period of 83 days, and a payables deferrable period of 36 days. What is SuperWave’s cash conversion cycle?

A) 96 days

B) 70 days

C) 85 days

D) 132 days

7) SuperWave has an average collection period of 49 days, an inventory conversion period of 83 days, and a payables deferrable period of 36 days. What is SuperWave’s operating cycle?

A) 96 days

B) 70 days

C) 85 days

D) 132 days

8) Swensen’s has an average collection period of 7 days, an inventory conversion period of 30 days, and a payables deferrable period of 60 days. What is Swensen’s operating cycle?

A) 97 days

B) 37 days

C) 23 days

D) -23 days

9) Alpha’s annual credit sales are $18 million; the accounts receivable balance is $1.5 million; the cost of goods sold is $12.6 million; the inventory balance is $350,000, and the balance in accounts payable is $700,000. Compute Alpha’s cash conversion cycle.

A) 105 days

B) 53.5 days

C) -53.5 days

D) 20.28 days

10) 22) As of December 31, WowWow, Inc. had a cash balance of $50,000. December sales were $150,000 and are expected to be $100,000 in January. 20% of sales in any month are cash sales, and 80% of sales are collected during the following month. In January, WowWow is expected to have total cash disbursements of $120,000, and WowWow requires a minimum cash balance of $50,000. WowWow’s expected cash receipts for January are

A) $80,000.

B) $100,000.

C) $110,000.

D) $140,000.

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