Question

For the current year, Delta Corporation has beginning and ending inventories of $80,000 and $100,000, respectively. Cost of goods sold for the year is $450,000. What is the company's average days in inventory?

Answer 1

Answer:

The average days in inventory are 5 days

Explanation:

The average days in inventory is computed or evaluated as:

Average days in inventory = COGS (Cost Of Goods Sold) / Average Inventories

where

COGS (Cost Of Goods Sold) amounts to $450,000

Average Inventories is computed as:

Average Inventories = Beginning Inventory + Ending Inventory / 2

where

Beginning Inventory amounts to $80,000

Ending Inventory amounts to $100,000

Putting the values:

Average Inventories = $80,000 + $100,000 / 2

= $180,000 / 2

Average Inventories = $90,000

Now, putting the values above in the formula:

Average days in inventory = $450,000 / $90,000

= 5 days