BP Has an Operating Cycle of 120 Days, an Average

question 104

Multiple Choice

BP has an operating cycle of 120 days, an average collection period of 40 days, and an average payment period of 30 days.Based on this information, BPs average age of inventory is ________ days.

• A)80
• B)50
• C)90
• D)70
• E)none of the above

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to fixed costs and profits.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.

Incremental Basis

A method of calculating changes in costs or benefits that result from small variations in the quantity of output or input.

Differential Basis

A method of calculating or analyzing the difference in costs or revenues between two alternative actions.