Question

Tinker's cost of goods sold in the year of sale (2019) was $850,000 and 2018 cost of goods sold was $870,000. The inventory at the end of 2019 was $198,000 and at the end of 2018 the inventory was $218,000. Tinker’s average number of days to sell its inventory during 2019 is closest to:

Answer 1

Answer:

The average number of days to sell its inventory is 89.3 days

Explanation:

The formula for computing inventory turnover ratio is given as average inventory/cost of goods sold *365

average inventory =opening inventory+closing inventory/2

 opening inventory is $218,000

closing inventory is $198,000

average inventory=($218,000+$198,000)/2

                              =$208000

cost of goods sold is $850,000

average inventory ratio=$208,000/$850,000*365

                                        =89.3 days

Answer 2

Answer:

Inventory turnover period in 2019  =89.3 days

Explanation:

The inventory turnover period also known as the inventory days is the average length of time it takes business to sell its stocks and replace same. The shorter the better as it indicates a high patronage from customers.

It is calculated as follows:

Inventory turnover = (Average inventory / cost of goods ) × 365 days

Note that,

average inventory =( opening inventory + closing inventory)/2

Average inventory = (218,000 + 198,000)/2 = 208,000

Cost of goods sold in 2019 = $850,000

Inventory turnover period = (208,000/850,000)× 365 days

                                          =89.3 days