The following data were extracted from the income statement of Boston Solutions,
ID: 2361116 • Letter: T
Question
The following data were extracted from the income statement of Boston Solutions, Inc.
2010
2009
Sales
$1,139,600
$1,192,320
Beginning inventories
80,000
64,000
Cost of goods sold
500,800
606,000
Ending inventories
72,000
80,000
Required:
(1)
Determine for each year:
a.
The inventory turnover; and
b.
The number of days’ sales in inventory. Round to nearest dollar and one decimal place.
(2)
What conclusions can be drawn from these data concerning the inventories?
2010
2009
Sales
$1,139,600
$1,192,320
Beginning inventories
80,000
64,000
Cost of goods sold
500,800
606,000
Ending inventories
72,000
80,000
Explanation / Answer
1.) A.) Inventory turnover = 14.9947 for 2010 and 16.56 for 2009 Find the average inventory for each year 76,000 for 2010 and 72,000 for 2009 Divide credit sales by average inventory for each year 1,139,600 / 76,000 = 14.9947 1,192,320 / 72,000 = 16.56 B.) 24.34187 days for 2010, 22.04106 days for 2009 Days sales in inventory = 365/inventory turnover 365/14.9947 = 24.34187 days 365/16.56 = 22.04106 days 2.) It takes more time in 2010 to get rid of inventory than in 2009, so that is the contributing reason for lower sales.
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