Respuesta :
In years 2 and 1, respectively, the inventory turnover was 5.5 and 6.2. The difference in the number of days sales in inventory for years 1 and 2 is 53.9 days and 65.5 days, respectively.
How do you calculate the number of days sales in inventory?
Inventory turnover (year 2) = Cost of goods sold (year 2) / Average inventory (year 2)
Average inventory (year 2) = (Beginning inventory + Ending inventory) / 2
Inventory turnover (year 2) = $500,800 / (($80,000 + $72,000) / 2) = 5.5
To calculate inventory turnover for year 1, we can use the same formula:
Inventory turnover (year 1) = Cost of goods sold (year 1) / Average inventory (year 1)
Average inventory (year 1) = (Beginning inventory + Ending inventory) / 2
Inventory turnover (year 1) = $606,000 / (($64,000 + $80,000) / 2) = 6.2
To calculate the number of days' sales in inventory for year 2, we need to divide the average inventory by the cost of goods sold and then multiply by the number of days in the year:
Days' sales in inventory (year 2) = (Average inventory (year 2) / Cost of goods sold (year 2)) * 365
Days' sales in inventory (year 2) = (($80,000 + $72,000) / 2) / $500,800 * 365 = 65.5 days
To calculate the number of days' sales in inventory for year 1, we can use the same formula:
Days' sales in inventory (year 1) = (Average inventory (year 1) / Cost of goods sold (year 1)) * 365
Days' sales in inventory (year 1) = (($64,000 + $80,000) / 2) / $606,000 * 365 = 53.9 days
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