The Operating Cycle

question 64

Multiple Choice

The operating cycle

• A) begins when the company receives the raw materials it purchased that would be used to produce the goods that the company manufactures.
• B) begins when the company uses its cash to purchase raw materials and ends when the company collects cash payments on its credit sales.
• C) To measure operating cycle we need another measure called the days' payables outstanding.
• D) ends not with the finished goods being sold to customers and the cash collected on the sales; but when you take into account the time taken by the company to pay for its purchases.

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Definitions:

Short-Run Total Cost

The total of all costs incurred in the production process when some factors of production are fixed.

Production Function

An equation, table, or graph that shows the maximum output of goods and services that can be produced with varying inputs under certain technological constraints.

Labor

The human effort, both physical and mental, used in the production process.

Average Cost

The cost per unit, determined by dividing the total production costs by the quantity of units produced.