Dabble, Inc. has sales of $977,000 and cost of goods sold of $514,000. The firm had...

Dabble, Inc. has sales of $977,000 and cost of goods sold of $514,000. The firm had a beginning inventory of $34,500 and an ending inventory of $44,500.

What is the length of the days’ sales in inventory?

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Expert Solution

Length of Day Sales in Inventory

Length of day sales in inventory = (Average Inventory / Cost of Goods sold ) * 365

Thus, in order to calculate length of day sales in inventory, calculating average Inventory first:

Opening Inventory = $34,500

Ending Inventory = $44,500

Average Inventory = (Opening Inventory + Closing Inventory ) / 2

Average Inventory = ($34,500 + $44,500 ) / 2 = $79,000 / 2 = $39,500

Cost of Goods sold = $514,000

Length of day sales in inventory = (39,500 / 514,000 ) * 365 = 28.04 days

Length of day sales is 28 days (after rounding off)

jeff jeffy answered 1 year ago

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