Selected information from the accounting records of Ellison Manufacturing Company follows:

Net sales ... P3,600,000

Cost of goods sold ... 2,400,000

Inventories at January 1 ... 672,000

Inventories at December 31 ... 576,000

What is the number of days' sales in average inventories for the year?

a. 102.2

b. 94.9

c. 87.6

d. 68.1

b. 94.9

Explanation:

The computation of the number of days' sales in average inventories is shown below:

Day inventory outstanding = (Beginning inventory + ending inventory) : 2 : cost of goods sold * total number of days in a year

= ($672,000 + $576,000) : 2 : $2,400,000 * 365 days

= ($624,000 : $2,400,000) * 365 days

= 94.90 days

Simply we take the average of inventory and divide from the costs of goods sold

All other information which is given is not relevant. Hence, ignored it