Question

Assume a firm’s inventory level of $15,500 represents 29 days' sales. Required: a. What is the...

Assume a firm’s inventory level of $15,500 represents 29 days' sales.

Required:

a. What is the annual cost of goods sold? (Use 365 days in a year. Do not round intermediate calculations. Round your answer to whole number.)

b. What is the inventory turnover ratio? (Round your answer to 2 decimal places.)

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Answer #1

Answer a.

Days Inventory Outstanding = 365 * Inventory / Cost of Goods Sold
29 = 365 * $15,500 / Cost of Goods Sold
Cost of Goods Sold = $195,086

Answer b.

Inventory Turnover Ratio = 365 / Days Inventory Outstanding
Inventory Turnover Ratio = 365 / 29
Inventory Turnover Ratio = 12.59 times

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