company reports the following:

Question

Line Item Description Amount
Cost of goods sold $564,655
Average inventory 66,430
Determine (a) the inventory turnover and (b) the days' sales in inventory. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume 365 days a year.

Line Item Description Answer
a. Inventory turnover fill in the blank 1
b. Days' sales in inventory fill in the blank 2
days

Answer 1

To calculate the inventory turnover and the days' sales in inventory, we will use the following formulas:

a) Inventory Turnover

The formula for inventory turnover is:

\[ \text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}} \]

Given:

• Cost of Goods Sold = $564,655
• Average Inventory = $66,430

Calculating Inventory Turnover:

\[ \text{Inventory Turnover} = \frac{564,655}{66,430} \approx 8.5 \]

b) Days' Sales in Inventory

The formula for days' sales in inventory is:

\[ \text{Days' Sales in Inventory} = \frac{365}{\text{Inventory Turnover}} \]

Using the Inventory Turnover calculated above:

\[ \text{Days' Sales in Inventory} = \frac{365}{8.5} \approx 42.94 \]

Rounding to one decimal place, this would be approximately 42.9 days.

Final Answers:

• a. Inventory Turnover: 8.5
• b. Days' Sales in Inventory: 42.9 days