question archive Harvey Industries turns over its inventory eight times each year; it has an average collection period of 40 days and an average payment period of 30 days
Harvey Industries turns over its inventory eight times each year; it has an average collection period of 40 days and an average payment period of 30 days
Subject:AccountingPrice: Bought3
Harvey Industries turns over its inventory eight times each year; it has an average collection period of 40 days and an average payment period of 30 days. The firm's annual sales are $4 million. Cost of goods sold is 75% of sales. Assume a 365-day year.
Find the firm's cash conversion cycle and resource investment if it makes the following changes simultaneously:
- Shortens the average age of inventory by 5days.
- Speeds the collection of accounts receivable by an average of 10 days.
- Extends the average payment period by 10 days.
If the firm pays 12% for its resource investment, by how much, if anything, could it increase its annual profit as a result of the changes in part b?
If the annual cost of achieving the profit in part c is $35,000, what action would you recommend to the firm? Why?
