Determine (a) the inventory turnover and (b) the number of days’ sales in inventory. Round to one decimal place.

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

Solutions

Expert Solution

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)

balaji rao answered 10 months ago

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