Data on Wentz Inc.for last year are shown below,along with the payables deferral period (PDP)for the firms against which it benchmarks.The firm's new CFO believes that the company could delay payments enough to increase its PDP to the benchmarks' average.If this were done,by how much would payables increase? Use a 365-day year.Do not round your intermediate calculations. $\begin{array}{lr}
\text { Cost of goods sold = } & \$ 77,000 \
\text { Payables }= & \$ 5,000 \
\text { Payables Deferral Period (PDP) }= & 23.70 \
\text { Benchmark Payables Deferral Period = } & 30.000
\end{array}$
?
A) $1,036
B) $1,382
C) $1,342
D) $1,648
E) $1,329

Question

Quizplus · Accepted Answer

First, calculate the daily cost of goods sold (COGS) by dividing the annual COGS by 365 days: $COGS / 365 = \$77,000 / 365 = \$210.96$ per day.Next, calculate the target payables based on the benchmark PDP: $Benchmark PDP \times Daily COGS = 30 \times \$210.96 = \$6,328.80$.The increase in payables is the difference between the target payables and the current payables: $Target Payables - Current Payables = \$6,328.80 - \$5,000 = \$1,328.80$, which rounds to \$1,329.

Data on Wentz Inc ? A) $1,036 B) $1,382 C) $1,342 D) $1,648 E)

Data on Wentz Inc ?
A) $1,036
B) $1,382
C) $1,342
D) $1,648
E)