Question

Use the following account information to find the average production cycle for Rian Company. 2013 and...

Use the following account information to find the average production cycle for Rian Company.

2013 and 2014 Selected Balance Sheet Accounts of Rian Company ​

12/31/14 ​ 12/31/13 Change

Accounts receivable ​ $40,499 ​ $49,205 ​ $8,706

Inventory ​$60,102 ​ $64,689 ​ $4,587

Accounts payable ​$29,239 ​ $27,212 ​$2,027

2014 Selected Income Statement Items for Rian Company

Cash sales ​$443,000

Credit sales ​$600,000

Total sales ​$1,043,000

Cost of goods sold ​$536,746

What is the average production cycle for Rian​ Company?

? days  ​(Round to one decimal​ place.)

Business   Finance   
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Answer #1
The formula to calculate the average production cycle is as under,
Average Production Cycle = (360 days x Average Inventories) / Cost of goods sold
Average Inventories = (Inventory as on 31/12/2014 + Inventory as on 31/12/2013) /2 = ($60,102 + $64,689) /2 = $62,395.50
Cost of goods sold for 2014 = $5,36,746
Average Production Cycle = (360 days x $62,395.50) / $5,36,746
Average Production Cycle for Rian Company = 41.8 days
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