question archive Calculating the Average Inventory, the Inventory Turnover Ratio, and the Inventory Turnover in Days Last year, Dogwood Company had net sales of $9,375,000 and cost of goods sold of $4,877,000
Calculating the Average Inventory, the Inventory Turnover Ratio, and the Inventory Turnover in Days Last year, Dogwood Company had net sales of $9,375,000 and cost of goods sold of $4,877,000
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Calculating the Average Inventory, the Inventory Turnover Ratio, and the Inventory Turnover in Days
Last year, Dogwood Company had net sales of $9,375,000 and cost of goods sold of $4,877,000. Dogwood had the following balances:
| January 1 | December 31 | |
| Accounts receivable | $725,000 | $775,000 |
| Inventories | 450,000 | 425,000 |
Required:
Note: Round answers to one decimal place. Assume 365 days per year.
1. Calculate the average inventory.
$
2. Calculate the inventory turnover ratio.
times
3. Calculate the inventory turnover in days.
days
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Answer:
Solution 1:
Average Inventory = ($450000 + $425000) / 2 = $437,500
Solution 2:
Inventory turnover ratio = Cost of goods sold / Average Inventory = $4,877,000 / $437,500 = 11.1 times
Solution 3:
Inventory turnover in days = 365 / 11.1 = 32.9 days
