Inventory Analysis The following data were extracted from the income statement o
ID: 2589650 • Letter: I
Question
Inventory Analysis
The following data were extracted from the income statement of Keever 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 final answers to one decimal place. Assume 365 days a year.
b. The inventory position of the business has deteriorated . The inventory turnover has decreased , while the number of days' sales in inventory has increased . The sales volume has declined faster than the inventory, resulting in a deteriorating inventory position.
I need number 2 answered, please.
Current Year Previous Year Sales $18,500,000 $20,000,000 Beginning inventories 940,000 860,000 Cost of goods sold 9,270,000 10,800,000 Ending inventories 1,120,000 940,000Explanation / Answer
(2) . Number of Sales days in inventory = Number of days in a year / Invemtory turnover ratio
thereforre as per the question,
number of days in a year =365
Inventory turnover ratio in current year=9
in Previous year = 12
Hence,
number of days sales in current year = 365/9 = 40.5 days
in previous year = 365/12 = 30.4 days
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