Data on Shin Inc for Last Year Are Shown Below,along

question 97

Multiple Choice

Data on Shin Inc for last year are shown below,along with the inventory conversion period (ICP) of the firms against which it benchmarks.The firm's new CFO believes that the company could reduce its inventory enough to reduce its ICP to the benchmarks' average.If this were done,by how much would inventories decline? Use a 365-day year.Do not round your intermediate calculations. $\begin{array}{lr}\text { Cost of goods sold }= & \$ 71,000 \\\text { Inventory = } & \$ 20,000 \\\text { Inventory Conversion Period (ICP) = } & 102.82 \\\text { Benchmark Inventory Conversion Period (ICP) }= & 38.00\end{array}$
?

• A) $12,608
• B) $14,752
• C) $11,221
• D) $11,347
• E) $12,482

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Definitions:

Average Variable Cost

The average amount of variable cost per unit, calculated by dividing total variable costs by the quantity of output.

Profit-Maximizing

The approach taken by an enterprise to ascertain the optimal price and output quantity for the highest profit.

MR = MC

A principle in economics stating that profit maximization occurs when marginal revenue equals marginal cost.

Perfectly Competitive Market

An economic theory describing a market where no individual buyers or sellers have the power to influence the price of a product, and where the products offered are homogenous, with no barriers to entry or exit for businesses.