Question

This information is available for Pharoah Company for 2017, 2018, and 2019. 2017 2018 2019 Beginning inventory $ 103,000 $ 319,000 $ 414,500 Ending inventory 319,000 414,500 472,000 Cost of goods sold 892,000 1,120,500 1,306,000 Net sales 1,200,000 1,605,500 1,903,000

Calculate inventory turnover for Pharoah Company for 2017, 2018, and 2019. (Round answers to 2 decimal places, e.g. 1.52.) 2017 2018 2019 Inventory turnover

Calculate days in inventory for Pharoah Company for 2017, 2018, and 2019. (Round answers to 1 decimal place, e.g. 1.5. Use 365 days for calculation.) 2017 2018 2019 Days in inventory days days days

Calculate gross profit rate for Pharoah Company for 2017, 2018, and 2019. (Round answers to 0 decimal places, e.g. 125%.) 2017 2018 2019 Gross profit rate % % %

Answer 1

1.

Inventory Turnover
	Cost of goods sold	/	Average Inventory	=	Inventory Turnover
2017	892,000.00	/	(103,000 +319,000)/2	=	4.23	Times
2018	1,120,500.00	/	(319,000+414,500)/2	=	3.06	Times
2019	1,306,000.00	/	(414,500+472,000)/2	=	2.95	Times

2.

Days in inventory
	Ending inventory	/	Cost of goods sold	x	Days	=	Days in inventory
2017	319,000.00	/	892,000.00	x	365	=	130.5	Days
2018	414,500.00	/	1,120,500.00	x	365	=	135.0	Days
2019	472,000.00	/	1,306,000.00	x	365	=	131.9	Days

3.

	Gross Profit Ratio
	Gross Profit	/	Sales Revenue	=	Gross Profit Rate
2017	308,000.00	/	1,200,000.00	=	26%
2018	485,000.00	/	1,605,500.00	=	30%
2019	597,000.00	/	1,903,000.00	=	31%
	Explanation
	Gross Profit
	Net Sales	-	Cost of goods sold	=	Gross Profit
2017	1,200,000.00	-	892,000.00	=	308,000.00
2018	1,605,500.00	-	1,120,500.00	=	485,000.00
2019	1,903,000.00	-	1,306,000.00	=	597,000.00