Question

Inventory Analysis

The following data were extracted from the income statement of Keever Inc.:

Inventory Analysis The following data were extracted from the income statement of Keever Inc. Previous Year $841,000 57,336 467,200 45,650 Current Year Sales Beginning inventories Cost of goods sold Ending inventories a. Determine for each year (1) the inventory turnover and (2) the number of days' sales in inventory. Round interim calculations to the nearest dollar and the final answers to one decimal place. Assume 365 days a year. $803,000 45,650 401,500 41,250 Current Year Previous Year 1. Inventory turnover 2. Number of days' sales in inventory b. The inventory position of the business has days days The inventory turnover has while the number of days' sales in inventory has

Answer 1

1) Calculation of Inventory turnover
Particulars			Current yr	Previous yr
Cost of goods sold (A)			401500	467200
Inventory at beginning (B)			45650	57336
inventory at the end ( C)			41250	45650
average inventory*** (B)+(C )/2 = D			43450	51493
inventory turnover (A)/(D)			9.2	9.1
2) No of days sales in inventory for each year
Particulars			Current yr	Previous yr
No of days in a year (1)			365	365
inventory turnover (2)			9.2	9.1
No of days sale in inventory (1)/(2)			39.7	40.1
*** Average inventory = inventory at beginning+inventory at end/2
b) the inventory position of the business has improved inventory turnover
has increased while the no of days sale in inventory has decrease