On Average,Furniture & More Is Able to Sell Its Inventory

question 5

Multiple Choice

On average,Furniture & More is able to sell its inventory in 27 days.The firm takes 87 days on average to pay for its purchases.On the other hand,its average customer pays with a credit card which allows the firm to collect its receivables in 4 days.Given this information,what is the length of operating cycle?

• A)31 days
• B)38 days
• C)45 days
• D)56 days
• E)62 days

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Definitions:

Total Cost Method

An accounting method that includes all costs related to the production of goods when calculating inventory cost.

Nonproduction Costs

Expenses not directly associated with the manufacturing or production of goods, such as selling, administrative, and other overhead costs.

Production Costs

Expenses directly associated with the creation of goods or services, including raw materials, direct labor, and manufacturing overhead.

Markup

The amount added to the cost price of goods to cover overhead and profit.