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Efficiency analysis)??The Brenmar Sales Company had a gross profit margin? (gross profitsdivided by÷?sales) Of 27 percent and...

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Finance

Efficiency analysis)??The Brenmar Sales Companyhad a gross profit margin? (gross

profitsdivided by÷?sales) Of 27 percent and sales of 9.1 millionlast year.?

71percent of the? firm's sales are on? credit, and the remainderare cash sales. ?Brenmar's current assets equal $1.5 ?million, itscurrent liabilities equal $ 297,700 and it has $ 107,200 in cashplus marketable securities.

a. If? Brenmar's accounts receivable equal$562,500?, what is its average collection? period?

b. If Brenmar reduces its average collectionperiod to 15 ?days, what will be its new level of accounts?receivable?

c.???Brenmar's inventory turnover ratio is 9.6times. What is the level of? Brenmar's inventories?

Answer & Explanation Solved by verified expert
3.8 Ratings (388 Votes)

Ans. Total Sales =   $9,100,000
Credit sales = $9,100,000 * 71%        = $6,461,000
Gross profit = Total sales * Gross profit margin
$9,100,000 * 27%            = $2,457,000
Cost of goods sold = Total sales - Gross profit
$9,100,000 - $2,457,000         = $6,643,000
Ans.   A Average collection period =   Accounts recievable / Credit sales * Number of days in year
$562,500 / $6,461,000 * 365
31.78 days
Ans. B Average collection period =   Accounts recievable / Credit sales * Number of days in year
15 =   Accounts recievables / $6,461,000 * 365
Accounts receivables = 15 * $6,461,000 / 365
$265,520.55
Ans. C Inventory turnover = Cost of goods sold / Inventory
9.6     =      $6,643,000 / Inventory
Inventory   =   $6,643,000 / 9.6
$691,979.17

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Transcribed Image Text

Efficiency analysis)??The Brenmar Sales Companyhad a gross profit margin? (grossprofitsdivided by÷?sales) Of 27 percent and sales of 9.1 millionlast year.?71percent of the? firm's sales are on? credit, and the remainderare cash sales. ?Brenmar's current assets equal $1.5 ?million, itscurrent liabilities equal $ 297,700 and it has $ 107,200 in cashplus marketable securities.a. If? Brenmar's accounts receivable equal$562,500?, what is its average collection? period?b. If Brenmar reduces its average collectionperiod to 15 ?days, what will be its new level of accounts?receivable?c.???Brenmar's inventory turnover ratio is 9.6times. What is the level of? Brenmar's inventories?

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