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spin [16.1K]
3 years ago
5

The following balance sheet information was provided by Western Company: Assets Year 2 Year 1 Cash $ 4,000 $ 2,000 Accounts rece

ivable 15,000 12,000 Inventory $ 35,000 $ 38,000 Assuming Year 2 net credit sales totaled $270,000, what were the company's average days to collect receivables? (Use 365 days in a year. Do not round intermediate calculations.)
Business
1 answer:
ICE Princess25 [194]3 years ago
7 0

Answer:

The company's average days to collect receivables is 18.25 days.

Explanation:

For computing the company's average days to collect receivables, first we have to calculate the account receivable turnover ratio. The formula is shown below

Account Receivable Turnover ratio = Net credit Sales ÷ Average accounts receivable

where,

Net credit sales is given

And, the average accounts receivable = (Year 1 + Year 2) ÷ 2

                                                                = ($15,000 + $12,000) ÷ 2

                                                                = $13,500

So, Account Receivable Turnover ratio = $270,000 ÷ $13,500 = 20

Now, average days to collect receivables = Number of days in a year ÷ Account Receivable Turnover ratio

= 365 ÷ 20

=  18.25 days

Hence, the company's average days to collect receivables is 18.25 days.

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Required 2

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therefore,

total direct manufacturing cost = $84,000 + $42,500 + $21,000 = $147,500

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total non-manufacturing cost = $20,500 + $52,000 = $72,500

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therefore,

incremental manufacturing cost = ($84,000 + $42,500 + $21,000) ÷ 1,000 units = $147.50

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