Inventory Analysis The following data were extracted from the income statement o

Question

Inventory Analysis The following data were extracted from the income statement of Brecca Systems Inc Current Year Previous Year Sales Beginning inventories Cost of goods sold Ending inventories 1,255,600 61,380 627,800 55,580 1,314,000 84,600 730,000 61,380 Determine for each year () the inventory turnover and (2) the oumber 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 Current Year Previous Year 1. Inventory turnover 2. Number of days' sales in inventory days days b. The inventory position of the business has ·The inventory turnover has , while the number of days' sales in inventory has

Explanation / Answer

1) Inventory turnover = Sales/Average inventory Current year Previous year Sales 1255600 1314000 Average inventory 58480 72990 ((61380+55580)/2) ((84600+61380)/2) Inventory turnover                                  21.47                                  18.00 2) Number of day's sales in inventory = (Ending inventroy/ cost of goods sold)*365 Current year Previous year Ending inventory 55580 61380 Cost of goods sold 627800 730000 Number of day's sales in inventory                                  32.31                                  30.69 ((55580/627800)*365) ((61380/730000)*365) b) The inventory position of the business has not improved . The inventory turnover has increased, While the number of days sales in inventory has also increased

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