Current Year Preceding Year Sales Beginning inventories Cost of goods sold Endin

Question

Current Year Preceding Year Sales Beginning inventories Cost of goods sold Ending inventories $817,600 47,660 408,800 43,060 $854,100 52,050 474,500 61,050 a. (1). Determine for each year the inventory turnover. Round to one decimal place. Current year Preceding year (2). Determine for each year the number of days' sales in inventory. Assume there are 365 days in the year. Round intermediate calculations to the nearest whole dollar and final answers to one decimal place Current year Preceding year days days b. What conclusions can be drawn from these data concerning the inventories?

Explanation / Answer

Answer = A) Inventory turnover Ratio = Cost of Goods Sold / Average Inventory Inventory turnover Ratio =   Current Year Preceding year Opening Inventory $                                       47,660 $                                52,050 Ending inventories $                                       43,060 $                                61,050 $                                       90,720 $                            1,13,100 Divide by "/" By 2 "/"By 2 "=" to "=" to Average Inventory $                                       45,360 $                                56,550 Current Year Preceding year Inventory turnover Ratio =   COGS $                                    4,08,800 474500 Divide By = "/" By "/" By Average inventory= 45360 56550 Inventory turnover Ratio = (Times)                                                9.01                                         8.39 Answer = 2 2017 2016 Days in inventory = (Ending inventory / COGS ) X 365 Ending inventory = $                                       43,060 $                                61,050 Divide By = "/" By "/" By COGS $                                    4,08,800 $                            4,74,500 Equal to =                                                0.11                                         0.13 Multiply By 365 "X "By 365 "X "By 365 Days in inventory =                                                    38                                            47 Answer = B) Option for Fill -in = Improving inventory possittion because the inventory turnover ratio is increase and number of days in inventory is also reducing

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