In: Accounting
A company reports the following: Cost of goods sold $560,000
Average inventory 112,000
Determine (a) the inventory turnover and (b) the number of days’ sales in inventory. Round to one decimal place
The following calculations can be used to calculate inventory turnover and the number of days' sales in inventory :
(a) Inventory Turnover = Cost of Goods Sold / Average Inventory (b) Number of Days' Sales in Inventory = 365 days / Inventory Turnover
Given: Cost of goods sold: $560,000 Average inventory: $112,000
(a) Inventory Turnover: Inventory Turnover = Cost of Goods Sold / Average Inventory = $560,000 / $112,000 = 5
Therefore, the inventory turnover is 5
(b) Number of Days' Sales in Inventory: Number of Days' Sales in Inventory = 365 days / Inventory Turnover = 365 days / 5 = 73
Therefore, the number of days' sales in inventory is 73 (rounded to one decimal place)
Therefore, the inventory turnover is 5
Therefore, the number of days' sales in inventory is 73 (rounded to one decimal place)