Cost of goods sold $500,000 Average inventory 62,500 Determine (a) the inventory turnover and (b) the number of days' sales in i

Question

4 years ago

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Cost of goods sold $500,000 Average inventory 62,500 Determine (a) the inventory turnover and (b) the number of days' sales in i

nventory. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume 365 days a year. a. Inventory turnover b. Number of days' sales in inventory days

Business

1 answer:

nadya68 [22] · Answer 1 · 2021-11-12T18:59:59+03:00

Answer:

(a) 8 times

(b) 45.6 days

Explanation:

Given that,

Cost of goods sold = $500,000

Average inventory = $62,500

Assume 365 days a year.

(a) Inventory turnover ratio:

= Cost of goods sold ÷ Average inventory

= $500,000 ÷ $62,500

= 8 times

(b) Number of days' sales in inventory days:

= 365 days ÷ Inventory turnover ratio

= 365 days ÷ 8

= 45.6 days