Question

Endor Company begins the year with $180,000 of goods in inventory. At year-end, the amount in inventory has increased to $197,000. Cost of goods sold for the year is $1,300,000. Compute Endor’s inventory turnover and days’ sales in inventory. Assume that there are 365 days in the year.

Answer 1

Answer:

6.896; 50.97

Explanation:

Average inventory = (Beginning inventory + Ending inventory) ÷ 2

                               = ($180,000 + $197,000) ÷ 2

                               = $188,500

Therefore,

Inventory Turnover ratio = (Cost of goods sold ÷ Average inventory)

                                         = $1,300,000 ÷ $188,500

                                        = 6.896

Days sales in inventory = 365 ÷ Inventory turnover ratio

Days sales in inventory= 365 ÷ 6.89

                                      = 50.97