KJ Enterprises Estimates That It Takes, on Average, Three Days

question 68

Multiple Choice

KJ Enterprises estimates that it takes, on average, three days for their customers' payments to reach them, one day for the payments to be processed and deposited by their bookkeeping department, and two more days for the checks to clear once they're deposited. What is their collection float?

• A) one day
• B) two days
• C) three days
• D) six days

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Definitions:

Common Fixed Costs

Expenses that do not change with the volume of production or sales and are shared among multiple products or services within a company.

Noncontrollable Fixed Costs

Costs that cannot be altered or influenced by the decisions of management in the short term.

Controllable Margin

The portion of income that can be directly controlled or influenced by managerial decisions, excluding fixed costs.

Operating Assets

Assets used by a company in its day-to-day operations to generate income, including cash, inventory, buildings, and equipment.