ECON 4400 Study Guide - Final Guide: Cash Conversion Cycle, Working Capital, Capital Requirement

• School: University of Guelph
• Department: Economics
• Course: ECON 4400
• Professor: Kathleen Rodenburg

Document Summary

Assume that carmed plc expects credit sales of 18m in the year and has budgeted production costs as follows: Raw materials are in inventory for an average of three weeks and finished goods are in inventory for an average of four weeks. All raw materials are added at the start of the production cycle, which takes five weeks and incurs labour costs and production overheads at a constant rate. Suppliers of raw materials allow four weeks credit, whereas customers are given 12 weeks to pay. Oleum plc sells a soap called fragro, which it buys in boxes of 1000 bars with ordering costs of 5 per order. Retail sales are 200,000 bars per year and holding costs are 2. 22 per year per 1000 bars. What is the economic order quantity and average inventory level for. Mine plc has annual credit sales of 15m and allows 90 days credit.