Question

5. The following information is available for Omari Corporation for 2018 (5 marks):

            Beginning inventory               $   700,000

            Ending inventory                         800,000

            Cost of goods sold                  6,000,000

            Sales                                        8,000,000

Instructions

1. Calculate the inventory turnover for Omari Corporation. (2.5 marks)
2. Calculate days in inventory for Omari Corporation. (2.5 marks)

Answer 1

(1)

Inventory turnover ratio = cost of goods sold/average inventory

= $6000000/$750000

= 8 times

Where,

Average inventory = (beginning inventory + ending inventory)/2

= ($700000 + $800000)/2 = $750000

(2)

Days in inventory = 365/inventory turnover ratio

= 365/8

= 45.625 days or 46 days