Answer:
The company's inventory turnover ratio and average days in inventory is 12 times and 30.41 days respectively
Explanation:
The computation of the company's inventory turnover ratio and average days in inventory is shown below:
Inventory turnover ratio = Cost of goods sold ÷ average inventory
where,
Average inventory = (Opening balance of inventory + ending balance of inventory) ÷ 2
= ($50,000 + $30,000) ÷ 2
= $40,000
The formula to compute the cost of goods sold is shown below:
Cost of goods sold = Opening inventory + Purchase - ending inventory
= $50,000 + $460,000 - $30,000
= $480,000
So, the cost of good sold is $480,000
Now put these values to the above formula
So, the answer would be equal to
= $480,000 ÷ $40,000
= 12 times
And, the Days in inventory equals to
= Total number of days in a year ÷ inventory turnover ratio
= 365 days ÷ 12 times
= 30.41 days
We assume 365 days in a year
