Question

inventory ...


A7X corporation has ending inventory of $705273 and cost of goods sold for the year just ended was $8,135,165

a. What is the inventory turnover? 

Inventory turnover _______ times

b. What is the days sales in inventory

Days sales in inventory______ days

c. How long on average did a unit of inventory sit on the shelf before it was sold? 

Days on shelf______ days

 

Answer

Introduction:

Ending inventory for a company generally indicates the balance goods which are available for sales & it is held by the company at the end of a particular accounting period. Cost of goods sold on the other hand refers to direct costs of producing the goods that are to be sold by the company.

Solution:

a) Inventory turnover ratio: This ratio indicates the number of times the goods have been sold or replaced by the company during a particular period.

Inventory turnover ratio = Cost of goods sold/Average inventory

Beginning inventory is not available to find the average inventory. Hence the ending inventory value can be used

Inventory turnover ratio = 8,135,165/705,273 = 11.53 times.

Day sales in inventory = 365*ending inventory/cost of goods sold

Day sales inventory = 365*705,273/8,135,165 = 257,424,645/8,135,165 = 31.64 days

Hence the unit would take 31.64 days in the shelf before being sold.

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