Inventory Analysis The following data were extracted from the income statement o
ID: 2574073 • Letter: I
Question
Inventory Analysis
The following data were extracted from the income statement of Brecca Systems Inc.:
a. Determine for each year (1) the inventory turnover and (2) the number of days' sales in inventory. Round interim calculations to the nearest dollar and the final answers to one decimal place. Assume 365 days a year.
b. The inventory position of the business has improved . The inventory turnover has increased , while the number of days' sales in inventory has decreased .
Current Year Previous Year Sales $846,800 $880,400 Beginning inventories 46,512 63,510 Cost of goods sold 423,400 489,100 Ending inventories 42,112 46,512 HOMEWORK 15 Show Me How--| Calculator Inventory Anal 2. PE.152B he ing data were trated rom the income statement f Orecea Systems Ine Previous Yeur 0,0 3.510 489,100 10.512 Current Yeur 46, 46,512 423,4U Sales FF 15-4B 5. PE.15-5.B 6 15-11H T. Ex. 15-1.Algo Beaning In entoies Endng inventoia: Previous Yeer nventcry tumover 2. Number of dayssales in inventery b. The invetory pa-ition of the business has improwedhe inentory turnaver has increased dars dars 9 Ex.15-b Ag 10. EX 15-6ALGOo 1. LX.15 9.ALGO 12EX15-11 13. CX.15 21ALGo while the umber days' sles inentory hes decreased v 1 Divi1A tte "ast ed onk1 tri thaa.weq" irwamery Ao a insenerv-m tirnia iniamery + Fncinq imuentarn-? rr 15-1 Algo 15. PT15-2Ago Previcus Next Progress: 12/15 rtems ssignment Score: 76.19% O Type nere to searchExplanation / Answer
a)1)
Previous year
Inventory turnover = Cost of goods sold/Average Inventory
Average inventory = (Ending inventories + Beginning inventories)/2 = (63510+46512)/2 = 55011
Inventory turnover = 489100/55011 = 8.89 times
Current year
Average inventory = (Ending inventories + Beginning inventories)/2 = (42112+46512)/2 = 44312
Inventory turnover = 423400/44312 = 9.55 times
a)2)
Previous year
Number of days sales in inventory = 365/8.89 = 41.06 days
Current year
Number of days sales in inventory = 365/9.55 = 38.22 days
b) The inventory position of the business has improved . The inventory turnover has increased , while the number of days' sales in inventory has decreased .
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