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3 June, 05:34

Compute the average days in inventory ratio using the following information: Net sales is $200,000 for the year, cost of goods sold are $80,000, last year's total assets were $900,000, and this year's total assets are $1,100,000. Receivables for both years are $40,000. Inventory changed from $30,000 last year to $10,000 this year.

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  1. 3 June, 07:47
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    91.25 days

    Explanation:

    The computation of the average days in inventory ratio is shown below:

    Average days in inventory is

    = Total number of days in a year : inventory turnover ratio

    where,

    Inventory turnover is

    = Cost of goods sold : average inventory

    = $80,000 : [ ($30,000 + $10,000) : 2]

    = 4

    And, the total number of days in a year is 365 days

    So, the average days in inventory is

    = 365 : 4

    = 91.25 days

    We simply applied the above formula
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