MGMT 332 Problem Set 2

Wing Air, Inc. has the following sales budget and cash collection information: Credit Sales In the month of the sale = 65% In the month after the sale = 20% In the second month after the sale = 15% A/R balance at the end of previous Q = $106,800 December uncollected sales = $76,300 January $234,800 February $249,300 March $271,000

106,800 - 76,300 divided by 0.15 = $203,333.33 November Sales = $106,800 minus $76,300 divided by 15%

Wing Air, Inc. presents the following information: Number of items used = 725 Frequency of order = 52 Carrying cost per unit = $54.00 Fixed order cost = $395.00 Calculate the EOQ.

2x52x395.00x725divided by 54.00 = 448,145.45 square root is 742.66 Economic Order Quantity is equal to the square root of 2 times 52 multiplied by $395.00 multiplied by 725 divided by $54.00.

Based on the following information, select the annual credit sales for Air Tax, Inc. Hint: You will have to calculate Receivables turnover in order to determine Annual Credit Sales. Collection Period = 30 Daily investment in receivables = $57,300 # days per year = 365

365 divided by 30 = 12.1666 12.1666 x 57,300 = 697,146.18 or 697,150.00 Annual credit sales equals 12.1667 multiplied by $57,300. Receivables Turnover equals 365 divided by 30.

Contrail Air, Inc. presents the following information: Number of items used = 575 Frequency of order = 52 Carrying cost per unit = $60.00 Fixed order cost = $395.00

575 divided by 2 x $60.00 = 17,250.00 Carrying costs equal 575 divided by 2 multiplied by $60.00.

Contrail Air, Inc. has sales of $800,000 and cost of goods sold of $600,000. The firm had a beginning inventory of $25,000 and an ending inventory of $30,000. What is the length of the inventory period?

Inventory turnover = $600,000 ÷ [($25,000 + $30,000) ÷ 2] = 21.82; Inventory period = 365 ÷ 21.82= 16.73 days

Based on the following information, select the annual credit sales for Cavu Air, Inc. Calculate the Receivables Turnover Ratio. Collection Period = 32 Daily investment in receivables = $68,943 # days per year = 365

Receivables Turnover equals 365 divided by 32 = 11.41

Aileron, Inc. has the following financial statement information: Item Beginning $17,563 Ending Inventory $18,987 A/R $14,562 - $14,562 A/P $13,526 - $16,987 Net Sales = $178,563 COGS = $145,362 Calculate the Cash Cycle Hint: You will need to calculate the inventory ratios, receivable ratios, payable ratios, and the operating cycle in order to calculate the cash cycle.

The cash cycle is equal to the Operating cycle minus the Payables period. The Cash cycle is equal to 75.65 minus 38.31