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Camp Manufacturing turns over its inventory five times each year, has an average payment period of...

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Finance

Camp Manufacturing turns over its inventory five times eachyear, has an average payment period of 35 days, and has an averagecollection period of 60 days. the firm has annual sales of $4.2million and cost of goods sold of $3.5 million.

a.Calculate the firm's operating cycle and cash conversioncycle.

b.What is the dollar value of inventory held by the firm?

c.If the firm could reduce the average age of its inventory from73 days to 63 days by how much would it reduce its dollarinvestment in working capital?

Answer & Explanation Solved by verified expert
3.7 Ratings (458 Votes)
a Calculation of inventory days Inventory days 365Inventory turnover Inventory days 73 days Operating cycle Inventory days Average collection period Operating cycle 7360 Operating cycle 133 days Cash    See Answer
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Transcribed Image Text

Camp Manufacturing turns over its inventory five times eachyear, has an average payment period of 35 days, and has an averagecollection period of 60 days. the firm has annual sales of $4.2million and cost of goods sold of $3.5 million.a.Calculate the firm's operating cycle and cash conversioncycle.b.What is the dollar value of inventory held by the firm?c.If the firm could reduce the average age of its inventory from73 days to 63 days by how much would it reduce its dollarinvestment in working capital?

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