14. A local retailer has sales of $950,000 and cost of goods sold of $617,400. A

Question

14. A local retailer has sales of $950,000 and cost of goods sold of $617,400. At the beginning of the year, the inventory was $62,200. At the end of the year, the inventory balance was $75,000. What is the inventory turnover rate? (Assume a 365-day year)

15. TCI Air Freight has sales of $625,000, costs of goods sold of $375,000, average accounts receivable of $30,820, and average accounts payable of $21,600. How long does it take for the firm's credit customers to pay for their purchases? (Assume a 365-day year)

16. Hudson Enterprises has sales of $1,040,000, average accounts receivable of $41,400 and average accounts payable of $25,600. The cost of goods sold is equivalent to 58% of sales. How long does it take Hudson to pay its suppliers? (Assume a 365-day year)

Explanation / Answer

14. A local retailer has sales of $950,000 and cost of goods sold of $617,400. At the beginning of the year, the inventory was $62,200. At the end of the year, the inventory balance was $75,000. What is the inventory turnover rate? (Assume a 365-day year)

Answer:

Calculation of inventory turnover rate:

Formula :

Inventory turnover rate = Cost of Goods sold / Average inventory

Average inventory = (Beginning inventory + Ending inventory) / 2 = ($62,200 + 75,000)/2 = $68,600

Hence,

Inventory turnover rate = $617,400 / $68,600

= 9 Times

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