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A- 10.5 Use the following information relating to Shana Company to calculate the inventory turnover ratio...

A- 10.5 Use the following information relating to Shana Company to calculate the inventory turnover ratio and the number of days’ sales in inventory ratio.

year sales cost of sales average inventory
2021 22000 16500 2400
2022 28000 21000 3000
2023 33000 24750 3500
2024 35000 26250 4000

Solutions

Expert Solution

Formula of inventory turnover ratio
Inventory turnover ratio = cost of goods sold/average inventory
calculation of inventory turnover ratio
year 2021 cost of sale = 16500
average inventory = 2400
Inventory turnover ratio = 16500/2400 = 6.88
year 2022 cost of sale = 21000
average inventory = 3000
inventory turnover ratio = 21000/3000 = 7
year 2023 cost of sale = 24750
average inventory = 3500
inventory turnover ratio = 24750/3500 = 7.07
year 2024 cost of sale = 26250
average inventory = 4000
inventory turnover ratio = 26250/4000 = 6.56
number of days sale in inventory ratio = 365/inventory turnover ratio
no of days in a year = 365 days
year 2021 = 365/6.88 = 53.05 days
year 2022 = 365/7 = 52 days
year 2023 = 365/7.07 = 52.63 days
year 2024 = 365/6.56 = 55.62 days

answers are rounded off upto 2 decimal places

ekkarill92 answered 3 years ago
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