Question

The following information was available for Hover Company at Dec 31, 2011; beginning inventory $110k; ending inventory $70k; cost of goods sold $660k; and sales $900k. Hoover's days in inventory in 2011 was

Answer 1

Answer: Hoover's days in inventory in 2011 was 50 days.

Explanation:

Given that,

Beginning inventory = $110000

Ending inventory = $70000

Cost of goods sold = $660000

Sales = $900000

Average Inventory = $\frac{Beginning\ Inventory + Ending\ Inventory}{2}$

=  $\frac{110000+70000}{2}$

= 90000

Inventory Turnover =  $\frac{cost\ of\ goods\ sold}{Average\ Inventory}$

=  $\frac{660000}{90000}$

= 7.33

Hoover's days in inventory in 2011 = $\frac{Number\ of\ days\ in\ a\ year}{Inventory\ Turnover}$

= $\frac{365}{7.33}$

= 50 Days