Average Daily Collection of Checks for a Firm Is $50,000

question 123

Multiple Choice

Average daily collection of checks for a firm is $50,000.The firm also writes on the average $35,000 of checks daily.If the collection period for checks is 5 days,calculate the net float.

• A) -$75,000
• B) $75,000
• C) -$425,000
• D) $425,000

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Definitions:

Operating Margin

A profitability measure calculated as operating income divided by revenue, showing the percentage of profits generated from operations before taxes and interest.

Variable Costing

An accounting method that only includes variable production costs (costs that change with the level of output) in the cost of goods sold and treats fixed costs as period costs.

Absorption Costing

A pricing technique that integrates all expenses related to production, such as direct materials, direct labor, along with both variable and fixed overhead costs, into a product's cost.

Operating Income

Earnings before interest and taxes (EBIT), representing the profit from a company's main business activities.