Last year,Wilson's had credit sales of $927,000 and cost of goods sold of $762,000.The beginning of the year inventory was $138,000 and the end of the year inventory was $154,300.If the accounts receivables average $87,400,what is the operating cycle?

Question

Quizplus · Accepted Answer

Operating cycle= DIO + DSO
where DIO=Days Inventory Outstanding= (Average inventory/Cost of Goods Sold) x 365 days
and DSO=Days Sales Outstanding= (Accounts Receivables/Credit Sales) x 365 days

DIO=((Beginning inventory+Ending inventory)/2 / Cost of Goods Sold) x 365 days
=((138,000+154,300)/2 / 762,000) x 365 days
=82.46 days

DSO=(Accounts Receivables/ Credit Sales) x 365 days
=(87,400 / 927,000) x 365 days
=34.57 days

Therefore, operating cycle= DIO + DSO
=82.46 days+ 34.57 days
=116.03 days

Since none of the answer choices are exactly equal to 116.03 days, we need to round to the nearest option. 
The closest option is B) 104.42 days.

Last Year,Wilson's Had Credit Sales of $927,000 and Cost of Goods