Question

A company reports the following: Cost of goods sold $660,000 Average inventory 60,000 Determine (a) the inventory turnover and (b) the number of days' sales in inventory. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume 365 days a year.

Answer 1

Answer:

(a) Inventory turnover = $11

(b) Total number of days = 33.2 days

Explanation:

We have given cost of goods sold (COGS) = $660000

Average inventory = 60000

(a) We have to find inventory turnover

Inventory turnover is given by

$inventory\ turn\ over=\frac{COGS}{average\ inventory}=\frac{660000}{60000}=11$

(b) Number of days sales in inventory = $=\frac{365}{inventory\ turnover}=\frac{365}{11}=33.2days$

Answer 2

Answer: Inventory Turnover 11

Number of days' sales in inventory 33.2 days

Explanation:(a) Inventory turnover= Cost of goods sold/Average inventory

=$660,000/$60,000

=11.0

(b)Number of days' sales in inventory= Average inventory/Average daily cost of goods sold

=$60,000/ ($660,000/365 days) = $60,000/ $1,808.21

=33.2 days