Dickens Tailor Shop (Dickens) makes tailored-to-measure suits, jackets, and pants for men and women. Customers who are interested in purchasing tailored-to-measure clothing make an appointment with one of Dickens’ tailors, at which time the customer decides on the style of clothing he or she wishes to buy, selects an appropriate fabric, and is measured by the tailor. Dickens keeps a large selection of fabrics so customers can see the actual fabric their clothing will be made from. A bolt of fabric is, on average, held in inventory for seven months before it is used to make a garment. Dickens pays for its fabric 30 days from the time it is received from the supplier. The time from a customer’s first appointment to the completion and delivery of the garment is, on average, 45 days. Customers receive an invoice when the garment is delivered and payment is received from the customer, on average, 20 days from the time of delivery.

Calculate the following for Dickens Tailor Shop (assume a month has 30 days):
a. Payables deferral period
b. Inventory self-financing period
c. Inventory conversion period
d. Receivables conversion period
e. Number of days between receiving inventory from suppliers and receiving cash from customers

  • CreatedFebruary 26, 2015
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