PE 17-5B Inventory analysis

A company reports the following:

Cost of goods sold $435,000
Average inventory 72,500

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 = $435,000 ÷ $72,500 
Inventory Turnover = 6.0 
Average Inventory 
Average Daily Cost of Goods Sold 
$72,500 ÷ ($435,000 ÷ 365) 
$72,500 ÷ $1,192 
60.8 days