On average, a firm sells $2,500,000 in merchandise a month. Its cost of goods sold equals...

On average, a firm sells $2,500,000 in merchandise a month. Its cost of goods sold equals 60 percent of sales, and it keeps inventory equal to one-half of its monthly cost of goods on hand at all times. If the firm analyzes its accounts using a 360-day year, what is the firm's inventory conversion period? a. 30 days b. 15 days c. 20 days d. 360 days e. 10 days

Solutions

Expert Solution

b.15 days.

inventory conversion period = inventory / cost of goods sold *360.

here,

inventory = (2,500,000) *60% cost * 1/2 =>750,000..............(since only one half is on hand at all times).

cost of goods sold = 2,500,000 *60% cost per month * 12 month

=>18,000,000.

so,

inventory conversion period = 750,000 / 18,000,000 *360 days

=>15 days.

jeff jeffy answered 1 year ago

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