Question

WORKING CAPITAL INVESTMENT Pasha Corporation produces motorcycle batteries. Pasha turns out 1,400 batteries a day at a cost of $8 per battery for materials and labor. It takes the firm 23 days to convert raw materials into a battery. Pasha allows its customers 40 days in which to pay for the batteries, and the firm generally pays its suppliers in 30 days. Assume 365 days in year for your calculations. a. What is the length of Pasha's cash conversion cycle? Round your answer to two decimal places. 33 days b. At a steady state in which Pasha produces 1,400 batteries a day, what amount of working capital must it finance? Round your answer to the nearest dollar $ 369600 c. By what amount could Pasha reduce its working capital financing needs if it was able to stretch its payables deferral period to 43 days? Round your answer to the nearest dollar. d. Pasha's management is trying to analyze the effect of a proposed new production process on its working capital investment. The new production process would allow Pasha to decrease its inventory conversion period to 16 days and to increase its daily production to 2,150 batteries. However, the new process would cause the cost of materials and labor to increase to $10. Assuming the change does not affect the average collection period (40 days) or the payables deferral period (30 days), what will be the length of its cash conversion cycle and its working capital financing requirement if the new production process is implemented? Round your answers to two decimal places. 26 days Cash conversion cycle Working capital financing

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

ACCOUNTS latest - Microsoft Excel (Product Activation Failed) View Add-Ins File Home Insert Page Layout Formulas Data Review - 2x % Cut Calibri General B I Top .Conditional statement sur les mains et beste . E Copy Paste Format Painter Clipboard HQ306 $ -% Number AutoSum - A Fill Sort & 2 Clear Filter Editing Formatting as Table Styles Find & Select Styles Cells 11 A A = = = V Wrap Text U B- A Merge & Center - Font Alignment fx CASH CONVERSION CYCLE = ICP + ACP - APP HQ HR HS HT PASHA CASH CONVERSION CYCLE = ICP + ACP - APP HO HP HU HU HW HX HY H 287 288 289 290 291 292 293 294 ICP = INVENTORY CONVERSION PERIOD ICP = 365 DAYS X AVERAGE INVENTORY/ COST OF GOODS SOLD ICP = GIVEN 23.00 DAYS 295 ACP = AVERAGE COLLECTION PERIOD ACP = 365 DAYS X AVERAGE RECEIVABLES/ SALES ACP = GIVEN 40.00 DAYS B B 296 297 298 299 300 301 APP = AVERAGE PAYABLES PERIOD ACP = 365 DAYS X AVERAGE PAYABLES/ COST OF GOOD SOLD APP = GIVEN 30.00 DAYS DAYS 33.00 (A+B-C) 302 CASH CONVERSION CYCLE = ICP + ACP - APP = WORKING CAPITAL FINANCING = 1400 X $8 X 33 DAYS = 369600 303 304 305 ► Rea FIFO 45 days cycle ROE, BV MV ratio VARIANCE BEP, OL FL ratios DETROIT float B-S profit loss SALES BUDGET dupont CASH BUDGET /budget ferences: R46 DIFF ANALYSIS ovel BOU 130% -_ 0 D.ER 9 * ENG 23-11-2019)

ACCOUNTS latest - Microsoft Excel (Product Activation Failed) View Add-Ins File Home Insert Page Layout Formulas Data Review - 2x % Cut Calibri = = 3 = Dr 11AA B- A General Wrap Text Wrap Text Merge Merge & Center - Center General 1 - 3 E Copy Paste Format Painter Clipboard B I U SF 4:0 .00 . Insert Delete Format $ -% % Number Conditional Format Formatting as Table Styles Cell Styles AutoSum - A Fill Sort & 2 Clear Filter Editing Find & Select Font Alignment Cells HP319 HO HP HQ HR HS HT HU HU HW HX HY H 305 306 CASH CONVERSION CYCLE = ICP + ACP - APP 307 308 ICP = GIVEN 23.00 DAYS A 309 ACP = GIVEN 40.00 DAYS 310 311 312 APP = REVISED 43.00 DAYS 313 DAYS 20.00 (A+B-C) CASH CONVERSION CYCLE = ICP + ACP - APP = WORKING CAPITAL FINANCING = 1400 X $8 X 20 DAYS = 224000 REDUCTION IN WORKING CAPITAL = 369600 - 224000 = 145600 314 315 316 317 318 319 320 321 322 323 FIFO budget 45 days cycle ROE, BV MV ratio VARIANCE BEP, OL FL ratios DETROIT float B-S profit loss SALES BUDGET dupont CASH BUDGET ferences: R46 DIFF ANALYSIS ovel BOJ 130% Rea O- ...B 199 * 4 ENG 23-11-2019

ACCOUNTS latest - Microsoft Excel (Product Activation Failed) View Add-Ins File Home Insert Page Layout Formulas Data Review - 2x % Cut = = = Dr General Wrap Text Merge Merge & Center - Center U SF 4:0 .00 . Insert Delete Format $ -% % Number Conditional Format Formatting as Table Styles Cell Styles 11AA B- A Font Fax HQ AutoSum - A Fill Sort & 2 Clear Filter Editing Find & Select Alignment Calibri E Copy Paste Format Painter B I Clipboard HP333 HO HP 319 320 321 322 Cells HR HS HT HU HV Hw Formula Bar HX HY H CASH CONVERSION CYCLE = ICP + ACP - APP ICP = 16.00 DAYS - A 323 324 ACP = 40.00 DAYS в APP = 30.00 DAYS 325 326 327 328 DAYS 26.00 (A+B-C) CASH CONVERSION CYCLE = ICP + ACP - APP = 329 330 WORKING CAPITAL FINANCING = 2150 x $10 X 26 DAYS = 559000.00 331 332 333 334 335 336 337 FIFO CASH BUDGET ferences: R46 budget 45 days cycle ROE, BV MV ratio VARIANCE BEP, OL FL ratios DETROIT float B-S profit loss SALES BUDGET dupont DIFF ANALYSIS ovel BOU 130% Rea - O- ...B 199 * 4 ENG 23-11-2019