Based on the following information, what is (1) inventory turnover; (2) average daily cost of goods sold using a 365 day year; and (3) number of days' sales in inventory. Cost of goods sold $195,640 Inventory: Beginning of year 20,500 End of year 18,628

Question

Business

Claudia Dorsey

31 May, 18:23

Based on the following information, what is (1) inventory turnover; (2) average daily cost of goods sold using a 365 day year; and (3) number of days' sales in inventory. Cost of goods sold $195,640 Inventory: Beginning of year 20,500 End of year 18,628

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York · Answer 1

1. inventory turnover: 10 times

2. Average daily cost of goods sold: $536 per day

3. Number of days' sales in inventory: 36.5 days

Explanation:

Inventory turnover ratio an efficiency ratio that indicates how many times a company sells and replaces its stock of goods during a particular period

Inventory turnover ratio is calculated by using following formula:

Inventory turnover ratio = Cost of Goods Sold/Average Inventory

In there:

Average Inventory = (Inventory beginning of year + Inventory end of year) / 2

In the company:

Average Inventory = (20,500 + 18,628) / 2 = $19,564

Inventory turnover = $195,640/$19,564 = 10 times

Average daily cost of goods sold = $195,640/365 = $536 per day

Number of days' sales in inventory = (1/10) x365 = 36.5 days