Entity A manufactures inventory. Entity A holds raw materials for 3 months, and it usually takes 4 months to sell the finished goods when completed. If the production process takes 6 months to complete the inventory, and it takes 1 month to collect cash on receivables, what is the normal operating cycle of Entity A?
A) 6 months
B) 9 months
C) 13 months
D) 14 months

Question

Quizplus · Accepted Answer

The normal operating cycle is the sum of the time to hold raw materials (3 months), production process time (6 months), time to sell finished goods (4 months), and time to collect receivables (1 month), totaling 14 months.

Entity a Manufactures Inventory