Cost of goods sold $630,000
Average inventory 90,000
Determine (a) the inventory turnover and (b) the number of days’ sales in inventory. Round to one decimal place.
Answer:
a. Inventory Turnover = Cost of Goods Sold ÷ Average Inventory
Inventory Turnover = $630,000 ÷ $90,000
Inventory Turnover = 7.0
b. Number of Days’ Sales in Inventory = Average Inventory
Average Daily Cost of Goods Sold
Number of Days’ Sales in Inventory = $90,000 ÷ ($630,000 ÷ 365)
= $90,000 ÷ $1,726
Number of Days’ Sales in Inventory = 52.1 days