Question

A company reports the following: Cost of goods sold $660,000 Average inventory 60,000 Determine (a) the inventory turnover and (b) the number of days' sales in inventory. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume 365 days a year.

Answer 1

Answer:

the inventory turnover is 11

while the average days outstanding is 33 days

Explanation:

inventory turnover:

the amount of times the inventory rotetes (is being sold) during the period

$\frac{COGS}{AVERAGE\: INVENTORY }$

660,000/60,000 = 11

The company sold his invenotry 11 times

days outstanding :

time to sale the entire inventory

if it rotates 11 times per year and the year has 365 days then:

$\frac{365}{inventory_{TO}}$

365/11 = 33.18 = 33days