Operating cycle: Operating cycle is the chain of business activities performed in an organization. An organization can be manufacturing, servicing of merchandising type. For a merchandiser, the main business activities are the purchase, payment to the supplier, sales, and receipts from the customer. Hence the operating cycle of a merchandiser is limited as compared with the operating cycle of a manufacturer. The Operating cycle mainly includes following activities: •Purchases from the supplier (either cash or on account) •Payment to suppliers •Inventory •Sales (either cash or on account) •Collection from customer The formula to calculate the operating cycle is as follows: Net Operating Cycle = Inventory Period + Accounts Receivable Period − Accounts Payable Period To Indicate: The cyclical nature of business activities.

Question

Want to see the full answer?

Answer 1

Question

Chapter 4, Problem 52E

To determine

Concept Introduction:

Operating cycle:

Operating cycle is the chain of business activities performed in an organization. An organization can be manufacturing, servicing of merchandising type. For a merchandiser, the main business activities are the purchase, payment to the supplier, sales, and receipts from the customer. Hence the operating cycle of a merchandiser is limited as compared with the operating cycle of a manufacturer.

The Operating cycle mainly includes following activities:

•Purchases from the supplier (either cash or on account)

•Payment to suppliers

•Inventory

•Sales (either cash or on account)

•Collection from customer

The formula to calculate the operating cycle is as follows:

Net Operating Cycle = Inventory Period + Accounts Receivable Period − Accounts Payable Period

To Indicate:

The cyclical nature of business activities.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Chapter 4 Pg. 318 Facility, Product, Batch and Unit Levels. Would you please explain and give examples for the different levels found in Activity Based Accounting. Also what would utitilies for the facility fall under? Which of the 4 categories

Question 3 Managerial accounting activity adds value to an organization by pursuing five major objectives, which excludes: A. Providing information for decision making and planning B. Assisting managers in directing and controlling operational activities C. Measuring the performance of activities within an organization D. Providing information for external users of financial report of the organisation O a Providing information for external users of financial reports of the organisation Ob Assisting managers in directing and controlling operational activities Measuring the performance of activities within an organization O d Providing information for decision making and planning Question 4 Joy & Co. produces a product.Variable cost per unit is $15.Joy wants to, sell 14,000 units. Its total fixed cost is $47,000. It wants to make a profit of $14,000. What is the Selling Price per Unit? A. $60 B. $40 C. $30 D. $20 $30 O b $20 $40 O d $60 O O O O

QUESTION 17 A business segment that is responsible for all of its revenues and expenses is known as: cost center investment center Profit center production center