The cost of production is 80 percent of the selling price. What is Vitales average accounts

QUESTION

Size of Accounts Receivable
Vitale, Baby!, Inc., has weekly credit sales of $20,000, and the average collection period is 35 days. The cost of production is 80 percent of the selling price. What is Vitales average accounts receivable figure?
Average collection Period = 365/Receivable Turnover Ratio 35 Days = 365/Receivable Turnover Ratio Receivable Turnover Ratio = 365/35 Receivable Turnover Ratio = 10.42 Times Receivable Turnover Ratio = Cost of good sold/average accounts receivable Receivable Turnover

o = 10.42 Times Cost of good sold = 80% of Selling Price = $20,000*80% = $16,000 10.42 = $16,000/Average Accounts Receivable Average Accounts Receivable = $16,000/10.42 = $15,35.50

ANSWER:

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