Question

​Carey's Department Store had net sales of​ $20 million and cost of goods sold of $ 13.00 million for the year. The beginning inventory for the year was $ 4.00 million. The ending inventory for the year was $ 8.00 million. What was the​ days' inventory​ outstanding? (Round any intermediary calculations to two decimal places and your final answer to the nearest​ day.) A. 28 days B. 168 days C. 91 days D. 46 days

Answer 1

Answer:

Option B) 168 Days' Inventory Outstanding

Explanation:

Days' Inventory Outstanding is defined as the number of days a company hold its inventory. The ratio is is computed as follows:

Days' Inventory Outstanding = (Average Inventory ÷ Cost of Goods Sold) × Number of Days in a Year*

where:

Average Inventory = (Beginning Inventory + Ending Inventory) ÷ 2

*Number of Days in a Year = 365

Calculations:

Average Inventory = ($4 Million + $8 Million) ÷ 2 = $6 Million  

Cost of Goods Sold = $13 Million  

Days' Inventory Outstanding = ($6 Million ÷ $13 Million) × 365 days

Days' Inventory Outstanding = 168.46 Days = ~168 Days