Question

Carey's Department Store had net sales of​ $20 million and cost of goods sold of

$14.00

million for the year. The beginning inventory for the year was

$7.00

million. The ending inventory for the year was

$11.00

million. What was the​ days' inventory​ outstanding? (Round any intermediary calculations to two decimal places and your final answer to the nearest​ day.)

Answer 1

Day’s inventory outstanding

Day’s inventory outstanding is the average number of days that a company inventory holds before sales.

Inventory turnover ratio:

Managing of inventory in the company is very import to earning high profit. Inventory turnover ratio indicate that the company how many time inventory convert in sales during the particular period

First find out average inventory

Average inventory = Beginning Inventory + ending inventory / 2

                                = $ 7 million + $ 11 million / 2

                               = $ 18 million / 2

                               = $ 9 million

Cost of Goods sold	$ 14 million
Denominator : Average inventory	$    9 million
Inventory turnover ratio	1.56 times

Inventory turnover in days :

Number of days of the year	365
Denominator : Inventory turnover ratio	/ 1.56 times
Inventory turnover in days	233.97 Days Or 234 days