The Brenmar Sales Company had a gross profit margin? (gross profits / sales) of

Question

The Brenmar Sales Company had a gross profit margin? (gross profits / sales) of 29 percent and sales of $9.5 million last year.??

77 percent of the? firm's sales are on? credit, and the remainder are cash sales. ? Brenmar's current assets equal $1.4?million, its current liabilities equal $296,800?, and it has $102,800 in cash plus marketable securities.

a. If? Brenmar's accounts receivable equal $563,000?,what is its average collection? period?

b. If Brenmar reduces its average collection period to 25 ?days, what will be its new level of accounts? receivable?

c. ?Brenmar's inventory turnover ratio is 8.9 times. What is the level of? Brenmar's inventories?

a.?If? Brenmar's accounts receivable equal $563,000?, what is its average collection? period?

The? company's average collection period will be ___ days.???(Round to two decimal? places.)

Explanation / Answer

a) Average collection period (ACP) = Account receivable/(credit sales/365)

                                                            =563,000/( (9,500,000*0.77)/365)

                                                            =563,000/20041.095

                                                            = 28.09 days

b) We have

Average collection period (ACP) = Account receivable/(credit sales/365)

                                                25= Account receivable/20041.095

Account receivables= 25*20041.095 =$501,027.40

c) Inventory turnover= Cost of goods sold/ Inventories

                                    8.90= 9,500,000*(1-0.29)/Inventories

            Inventories= 6,745,000/8.90

                                    =$757,865.17

Please feel free to ask if you have any query in the comment section.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.