A company reports the following: Cost of goods sold $435,000 Average inventory 72,500

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 

A company reports the following:

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