Scherzer Department Store had net credit sales of $25,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year was $2,500,000. Given this, average number of days in inventory for the year was closest to Select one: a. 61 days. b. 73 days. c. 10 days. d. 6 days. e. 37 days.

Question

Business

Junior Mckinney

26 March, 00:48

Scherzer Department Store had net credit sales of $25,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year was $2,500,000. Given this, average number of days in inventory for the year was closest to Select one: a. 61 days. b. 73 days. c. 10 days. d. 6 days. e. 37 days.

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Answers (1)

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Jayda Navarro · Answer 1

d. 6 days

Explanation:

Average number of days in inventory is an efficiency ratio. It measures the average number of days an entity will holds its stock/inventory before such inventory is sold.

It is given as the ratio of the number of days in the period to the inventory turnover. Inventory turnover is the ratio of cost of goods sold to average inventory.

Hence, average number of days in inventory for the year

= 365 / ($15,000,000/$2,500,00)

= 365/60

= 6.08 days