When Using the Bardahl Formula, an Increase in Annual Credit

question 44

Multiple Choice

When using the Bardahl formula, an increase in annual credit sales (while holding the average accounts receivable balance constant) has which of the following effects on the working capital requirements?

• A)increase
• B)decrease
• C)no effect
• D)increase, decrease, or no effect, depending on other factors

---

Definitions:

Labor Costs

The total sum of all wages paid to employees, as well as the cost of employee benefits and payroll taxes incurred by an employer.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including but not limited to utilities, maintenance, and salaries of supervisory personnel.

Manufacturing Inventories

Manufacturing inventories consist of raw materials, work-in-process items, and finished goods that are held by a company in the course of producing its products.

Work-In-Process

Items that are in production but are not yet completed; represents one of the stages in the inventory of a manufacturing company.