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

Question

Quizplus · Accepted Answer

The average age of inventory can be calculated by subtracting the average collection period and the average payment period from the operating cycle. So, 120 days (operating cycle) - 40 days (average collection period) - 30 days (average payment period) = 50 days. However, the correct calculation for the average age of inventory is actually the operating cycle minus the average collection period, which is 120 - 40 = 80 days. The average payment period does not affect the calculation of the average age of inventory.

BP Has an Operating Cycle of 120 Days, an Average