Stamp, Inc. has an operating cycle of 81 days and takes 47 days to collect on its receivables. What is its level of inventory if the firm's cost of goods sold is $312,455? Round your final answer to the nearest dollar.
A) $9,190
B) $14,685
C) $29,105
D) $69,339

Question

Quizplus · Accepted Answer

The operating cycle is the sum of the days inventory outstanding (DIO) and the days sales outstanding (DSO). Given that the operating cycle is 81 days and it takes 47 days to collect receivables (DSO), the days inventory outstanding (DIO) is 81 - 47 = 34 days. To find the level of inventory, we use the formula: Inventory = (Cost of Goods Sold / 365) * DIO. Plugging in the numbers: Inventory = ($312,455 / 365) * 34 = $29,105 (rounded to the nearest dollar).