chapter 12 modules

Mavericks Cosmetics buys $4,098,636 of product (net of discounts) on terms of 6/10, net 60, and it currently pays on the 10th day and takes discounts. Mavericks plans to expand, and this will require additional financing. If Mavericks decides to forego discounts, what would the effective percentage cost of its trade credit be, based on a 365-day year? Answer in % terms to 2 decimal places.

1+(.06/1-.06)]^(365/10)-1 =1.06^36.5-1 =8.5683 =856.83

Mahrouq Technologies buys $16,069,272 of materials (net of discounts) on terms of 4/30, net 60, and it currently pays after 5 days and takes discounts. Mahrouq plans to expand, and this will require additional financing. If Mahrouq decides to forego discounts and thus to obtain additional credit from its suppliers, calculate the nominal cost of that credit. Answer in % terms to 2 decimal places (no % sign)

(.04/.94)*(365/30) =0.04167*12.1667 =0.5069 =50.69

Davis Supply maintains an average inventory of 2,000 dinosaur skulls for sale to filmmakers. The carrying cost per skull per year is estimated to be $150.00 and the fixed order cost is $63. What is the economic order quantity (EOQ)? (Round to the nearest whole number.)

(2*average inventory*buying cost/carrying cost)^(1/2) (2*2000*63/150)^1/2 =40.98 =41

Libscomb Technologies' annual sales are $6,353,268 and all sales are made on credit, it purchases $3,307,694 of materials each year (and this is its cost of goods sold). Libscomb also has $553,739 of inventory, $481,710 of accounts receivable, and $445,457 of accounts payable. Assume a 365 day year. What is Libscomb's Inventory Period (in days)?

(inv/cogs)*365 (481710/3307694)* 365 =61.1

Hammond Supplies expects sales of 201,024 units per year with carrying costs of $2.96 per unit and ordering cost of $9.76 per order. Assuming the level of inventory is stable, what is the optimal average number of units in inventory? Round to the nearest whole number.

=(sq. root) 2*annual sales*ordering cost/carrying cost (sq. root) 2* 201024*9.76/2.96 (sq. root)1325671.7838 1151.372/2 =575.69 =576

Gillstrap Promotions has projected the following values for the next three months: January February March Sales:$352,000$379,000$416,594Purchases on Trade Credit:$218,000$240,000$260,000 Cash Expenses: $88,000$91,000$94,000 Taxes, interest, and dividends: $18,000$20,000$41,000 Capital Expenditures: $50,0000$25,000 All sales are credit sales with 40% collected in the month of sale, 50% collected the following month, and the remainder collected in the second month after the sale. Credit purchases are paid in 30 days and all other items require immediate payment. Compute the net cash inflow for March.

Sales collected = 40% of March sales + 50% of February sales + 10% of January sales = 0.4 x 416594 + 0.5 x 379,000 + 0.1 x 352,000 = $391337.60 Purchases on Trade credit for Feb = $240,000 + Cash Expenses = $94,000 + Taxes, interest and dividends = $41,000 + Capital expenditures = $25,000 Net Cash outflows = $400,000 Net Cash inflows = 391337.60- 400,000 = -8662.40

Libscomb Technologies' annual sales are $5,785,482 and all sales are made on credit, it purchases $4,011,855 of materials each year (and this is its cost of goods sold). Libscomb also has $537,759 of inventory, $1,475,000 of accounts receivable, and $1,400,000 of accounts payable. Assume a 365 day year. What is Libscomb's Receivables Period (in days)?

accounts recievable/total credit sales*365 1475000/5785482* 365 =93.06

Libscomb Technologies' annual sales are $6,615,140 and all sales are made on credit, it purchases $4,071,988 of materials each year (and this is its cost of goods sold). Libscomb also has $553,442 of inventory, $521,646 of accounts receivable, and beginning and ending of year $448,048 and $420,069 accounts payables (respectively). Assume a 365 day year. What is Libscomb's Cash Cycle (in days)?

average payables= (448048+420069)/2 = 434058.50 days of inv =inv/cogs*365 553442/4071998* 365 =*49.61* days of sales= recievables/credit sales*365 =521646/6615140* 365 =*28.78* days payable= average payable/cogs*365 434058.50/4071988*365 =*38.91* cash cycle= days inv+ days sales-payable =49.61+28.78-38.91 =39.48

Carlisle Transport had $4,938 cash at the beginning of the period. During the period, the firm collected $1,635 in receivables, paid $2,032 to supplier, had credit sales of $6,826, and incurred cash expenses of $500. What was the cash balance at the end of the period?

balance= cash+ recievables-paid-expenses 4938+1635-2032-500 =4041

Libscomb Technologies' annual sales are $6,178,922 and all sales are made on credit, it purchases $4,049,369 of materials each year (and this is its cost of goods sold). Libscomb also has $512,426 of inventory, $521,617 of accounts receivable, and $476,609 of accounts payable. Assume a 365 day year. What is Libscomb's Inventory Turnover?

cogs/Inv =4049369/512426 =7.90

Libscomb Technologies' annual sales are $6,619,669 and all sales are made on credit, it purchases $3,103,318 of materials each year (and this is its cost of goods sold). Libscomb also has $572,253 of inventory, $532,544 of accounts receivable, and $498,771 of accounts payable. Assume a 365 day year. What is Libscomb's Receivables Turnover?

credit sales/accounts recievable 6619669/532554= 12.43

Libscomb Technologies' annual sales are $6,222,265 and all sales are made on credit, it purchases $4,380,823 of materials each year (and this is its cost of goods sold). Libscomb also has $557,549 of inventory, $539,065 of accounts receivable, and $439,067 of accounts payable. Assume a 365 day year. What is Libscomb's Operating Cycle (in days)?

inv turnover=purchases/inventory 4380823/557549= 7.86 inv period=365/7.86 =*46.44* receivable turnover= credit sales/recievables 6222265/539065= *11.54* rec period=365/11.54 =31.63 operating cycle 46.44+31.63= 78.07