ACCA FM · Chapter 3 · Question 2 of 10
A manufacturer provides the following annual data ($000): purchases of raw materials 2,190, cost of sales 3,650, credit sales 4,380. Year-end balances ($000): raw materials 300, work in progress 220, finished goods 400, trade receivables 600, trade payables 270. Work in progress and finished goods periods are based on cost of sales. What is the cash operating cycle (365-day year)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 117 days
Explanation
Raw materials period = 300/2,190 x 365 = 50 days; WIP = 220/3,650 x 365 = 22 days; finished goods = 400/3,650 x 365 = 40 days; receivables = 600/4,380 x 365 = 50 days; payables = 270/2,190 x 365 = 45 days. Cycle = 50 + 22 + 40 + 50 - 45 = 117 days (all periods are exact whole days).
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