Procter & Gamble is a multinational corporation that manufactures and markets ma

Question

Procter & Gamble is a multinational corporation that manufactures and markets many products that are probably in your home. Last year, sales for the company were $76,481 (all amounts in millions). The annual report did not disclose the amount of credit sales, so we will assume that 90 percent of sales were on credit. The average gross profit rate was 51 percent on sales. Account balances follow:

Compute the turnover for the accounts receivable and inventory. (Round your answers to 1 decimal place.)

Compute the average age of receivables, and the average days' supply of inventory. (Use 365 days in a year. Round your answers to 1 decimal place.)

Procter & Gamble is a multinational corporation that manufactures and markets many products that are probably in your home. Last year, sales for the company were $76,481 (all amounts in millions). The annual report did not disclose the amount of credit sales, so we will assume that 90 percent of sales were on credit. The average gross profit rate was 51 percent on sales. Account balances follow:

Explanation / Answer

1. Credit sales = $ 76,481 x 90% = $ 68832.9 or $ 68833

Average account receivable = (6645 + 5735) /2 =$ 6,190

Therefore turnover for accounts receivable is Credit sales / Average accounts receivable = 68,833/ 6,190 = 11.12 times

If gross profit is 51% of sales, cost of goods sold = 100 -51 = 49%.of sales

Therefore cost of goods sold in this case is 76,481 x 49% = $ 37, 476 approx.

Average inventory = ( 6,825 + 6,304 ) /2 = $ 6565 approx

Turnover of inventory is calculated as Cost of goods sold / Average inventory = 37,476 / 6,565 = 5.71 times

Average age of receivables = 365 / 11.12 = 32.8 days

Average days' supply of inventory = 365 / 5.71 = 63.9 days.

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