Orion Manufacturing provided the following data for the current year:<br/><br/>- Net Sales: $5,000,000<br/>- Cost of Goods Sold: $3,500,000<br/>- Average Accounts Receivable: $600,000<br/>- Average Inventory: $800,000<br/>- Average Accounts Payable: $450,000<br/><br/>Management is considering a new vendor policy that would increase the average accounts payable to $550,000 but would require a price increase on raw materials, raising Cost of Goods Sold by $100,000 (assuming sales price and volume remain constant). What would be the net impact on the Cash Conversion Cycle (CCC)?

Current Scenario:<br/>DIO = ($800,000 / $3,500,000) * 365 = 83.43 days<br/>DSO = ($600,000 / $5,000,000) * 365 = 43.80 days<br/>DPO = ($450,000 / $3,500,000) * 365 = 46.93 days<br/>CCC = 83.43 + 43.80 - 46.93 = 80.30 days<br/><br/>Proposed Scenario:<br/>New COGS = $3,600,000<br/>New AP = $550,000<br/>DIO = ($800,000 / $3,600,000) * 365 = 81.11 days (Inventory turnover speeds up due to higher COGS value)<br/>DSO = ($600,000 / $5,000,000) * 365 = 43.80 days (Unchanged)<br/>DPO = ($550,000 / $3,600,000) * 365 = 55.76 days<br/>CCC = 81.11 + 43.80 - 55.76 = 69.15 days<br/><br/>Change = 69.15 - 80.30 = -11.15 days (Decrease of ~11.2 days).