Question

The following information is available for Zoe’s Activewear Inc. for three recent fiscal years. 2022 2021 2020 Inventory $553,000 $568,000 $332,000 Net sales 1,948,000 1,725,000 1,311,000 Cost of goods sold 1,552,000 1,288,000 947,000 (a) Calculate the inventory turnover, days in inventory, and gross profit rate for 2022 and 2021. (Round inventory turnover to 1 decimal place, e.g. 5.2, days in inventory to 0 decimal places, e.g. 125 and gross profit rate to 1 decimal place, e.g. 5.2%.)

Answer 1

Answer:

Please see answers below

Explanation:

2022.

Inventory turnover = Sales / average inventory

Where,

Average inventory = Beginning inventory + Ending inventory

Sales for 2022 = $1,948,000

Average inventory = (553,000 + 586,000) / 2 = 560,500

Inventory turnover = 1,948,000 / 560,500

Inventory turnover = 3.475468332

• Days on inventory

= 365 / Inventory turnover

= 365 / 3.47546833184657

= 105

• Gross profit rate

= Gross profit / Sales × 100

= (1,948,000 - 1,552,000) / 1,948,000 × 100

= 20.33%

2021.

Sales = 1,725,000

Average inventory = (332,000 + 568,000) / 2 = 450,000

Inventory turnover = 1,725,000/450,000

= 3.833333333

• Days on inventory

= 365 / 3.833333333

= 95 days

• Gross profit rates

= Gross profit / Sales × 100

= (1,725,000 - 1,288,0000) / 1,725,000

= 25.33%