The Up-Towner has sales of $913,400, costs of goods sold of $579,300, inventory of $187,400, and accounts receivable of $78,900. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit? A. 106.46 days B. 84.69 days C. 74.19 days D. 118.08 days E. 121.07 days

D. 118.08 days

Explanation:

We know,

Days sales inventory = 365 days : Inventory Turnover

To determine the days sales inventory, we have to find inventory turnover.

So, We know,

Inventory turnover = Cost of goods sold : Average Inventory

Given,

Cost of goods sold = $579,300

Average Inventory = (Beginning Inventory + Ending Inventory) : 2

Since, there is no beginning and ending inventory, the inventory remains the average inventory.

Therefore, average inventory = $187,400

Putting the values into the inventory turnover formula, we can get,

Inventory turnover = $579,300 : $187,400

or, Inventory turnover = 3.09 times

Therefore,

Days sales inventory = 365 days : Inventory Turnover

or, Days sales inventory = 365 days : 3.09

Therefore, Days sales inventory = 118.08 days. So, D is the answer.