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Route Canal Shipping Company has the following schedule for aging of accounts receivable: Age of Receivables...

Route Canal Shipping Company has the following schedule for aging of accounts receivable:

Age of Receivables
April 30, 20X1
(1) (2) (3) (4)
Month of
Sales		 Age of
Account		 Amounts Percent of
Amount Due
April 0–30 $ 212,220 _______
March 31–60 94,320 _______
February 61–90 141,480 _______
January 91–120 23,580 _______
Total receivables $ 471,600 100%


a. Calculate the percentage of amount due for each month.

b. If the firm had $1,572,000 in credit sales over the four-month period, compute the average collection period. Average daily credit sales should be based on a 120-day period.

Part two:

Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 60,500 units per year, an ordering cost of $4 per order, and carrying costs of $1.60 per unit.

a. What is the economic ordering quantity?

b. How many orders will be placed during the year?

c. What will the average inventory be?

d. What is the total cost of ordering and carrying inventory?

Solutions

Expert Solution

Greetings!

PART A :-

a. Calculation of Percentage of Amount Due:-

Formula:-

(1) (2)
Month of
Sales		 Age of
Account
April 0–30 212,220 45%
March 31–60 94,320 20%
February 61–90 141,480 30%
January 91–120 23,580 5%
Total receivables 471,600 100%

b. Average collection Period =

= = 36 Days

PART - TWO

a. Economic Order Quantity =

= 550 Units

b.Total Order in a year = =110 Orders

c. Average Inventory    = 275 Units

d. Total Ordering Cost = Total Oder in a Year * Odering cost per Order = 110 Orders * 4 = $ 440

Total Carrying Cost = Average Inventory * Carrying Cost / Unit =275 Units * $1.60 = $ 440

Regards!!

  

jeff jeffy answered 2 years ago
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