Zucha Corporation has an inventory period of 55 days, an accounts receivable (A/
ID: 2716330 • Letter: Z
Question
Zucha Corporation has an inventory period of 55 days, an accounts receivable (A/R) period of 6 days, and an accounts payable (A/P) period of 3 days. The company’s annual sales is $182,795. Answer following questions.
(1) How many times per year does the company turn over its inventory?
(2) If the company’s cost of goods sold (COGS) is 60 percent of the annual sales, what is its average inventory?
6.6364 times; $16,527
6.6364 times; $27,544
6.2931 times; $17,428
6.2931 times; $30,636
5.9836 times; $18,330
6.6364 times; $16,527
6.6364 times; $27,544
6.2931 times; $17,428
6.2931 times; $30,636
5.9836 times; $18,330
Explanation / Answer
Answer to Part (1):
Given data,
Inventory Holding Period = 55 days
Number of days in a year = 365
Number of times the company turn over its inventory per year
=Inventory Turnover Ratio
=Number of days in a year / Inventory Holding Period
=365 / 55
=6.6364 times
The company turnover its inventory 6.6364 times per year.
Answer to Part (2):
Cost of Goods Sold
= 60% (sales)
=60% ($182795)
=$109677
Inventory Turnover Ratio = Cost of Good Sold / Average Inventory
Therefore, Average Inventory
=Cost of Goods Sold / Inventory Turnover Ratio
=$109677 / 6.6364
=$16527
Therefore, answer is the first option given i.e., 6.6364 times; $16527
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