Question

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?

Answer 1

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!!