Average Level of Inventory
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1. Vanity Press, Inc., has annual credit sales of $1.6 million and a gross profit margin
of 35 percent.
a. If the firm wishes to maintain an average collection period of 50 days, what
level of accounts receivable should it carry? (Assume a 365-day year.)
b. The inventory turnover for this industry averages six times. If all of Vanity's
sales are on credit, what average level of inventory should the firm maintain
to achieve the same inventory turnover figure as the industry?
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This solution helps in estimating average level of inventory with step-by-step calculations.
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1. a. If the firm wishes to maintain an average collection period of 50 days, what
level of accounts receivable should it carry? (Assume a ...
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