Question

Suppose at December 31 of a recent year, the following information (in thousands) was available for sunglasses manufacturer Oakley Inc.: ending inventory $156,748; beginning inventory $108,738; cost of goods sold $348,930 and sales revenue $757,813.
Required:
a. Calculate the inventory turnover for Oakley, Inc. (Round inventory turnover to 2 decimal places, e.g. 5.12.)
b. Calculate the days in inventory for Oakley, Inc. (Round days in inventory to 0 decimal places, e.g. 125.)

Answer 1

Answer:

a. 2.63

b. 139 days

Explanation:

a. Inventory Turnover is a ratio that measures how often inventory is replaced by a company. A higher ratio is good because it means that the company is selling more.

Formula;

= $\frac{Cost of Goods Sold}{ \frac{Beginning Inventory + Closing Inventory}{2} }$

= $\frac{348,930}{ \frac{108,738 + 156,748}{2} }$

= $\frac{348,930}{132,743}$

= 2.63

b. Days in Inventory refers to the amount of time that stock remains in the company before it is sold. This is preferred to be lower as opposed to higher.

= $\frac{365}{Inventory Turnover Ratio}$

= $\frac{365}{2.63}$

= 138.78

= 139 days