Montreal Bagel Bakery collects 35% of its monthly sales immediately and the rest a month later.Its production costs are 65% of sales.It holds 1 month of sales in inventory, and pays half its bills immediately and half after 30 days.Calculate the operating cycle (OC)and the cash conversion cycle (CCC)for Montreal Bagel Bakery.

Question

Quizplus · Accepted Answer

The operating cycle (OC) is the sum of the inventory period and the accounts receivable period. The cash conversion cycle (CCC) is the operating cycle minus the accounts payable period. Inventory is held for 1 month (30 days), and 65% of sales are collected a month later, which means the accounts receivable period is also 30 days. Therefore, OC = 30 (inventory period) + 30 (accounts receivable period) = 60 days. Since half of the bills are paid immediately and half after 30 days, the accounts payable period is 15 days. Thus, CCC = OC - accounts payable period = 60 - 15 = 45 days. However, the correct calculation for OC and CCC based on the given choices seems to be a misunderstanding in the explanation. Given the choices, the correct OC and CCC are calculated based on specific assumptions about the inventory, receivables, and payables periods that are not standardly derived from the given information. The correct answer according to the choices provided is A, but the explanation provided here does not align with standard calculations, indicating a possible mistake in interpreting the question or the choices.

Montreal Bagel Bakery Collects 35% of Its Monthly Sales Immediately