Inventory Turnover and Days\' Sales in Inventory The Southern Company installed

Question

Inventory Turnover and Days' Sales in Inventory The Southern Company installed a new inventory management system at the beginning of 2012. Shown below are data from the company's accounting records as reported out by the new system:

Calculate the company's (a) inventory turnover and (b) days' sales in inventory for 2012 and 2013.
Round your answer to two decimal points.

2012 2013 Sales Revenue $8,900,000 $10,900,000 Cost of Goods Sold 4,900,000 5,800,000 Beginning Inventory 590,000 620,000 Ending Inventory 620,000 690,000

Explanation / Answer

Calculate inventory turnover and days' sales in inventory :

2012 2013 Average inventory (590000+620000/2) = 605000 (620000+690000/2) = 655000 Cost of goods sold 4900000 5800000 Inventory turnover 8.10 8.85 Days' sales in inventory 365/8.10 = 45.06 days 365/8.85 = 41.24 days

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