Answer:
Days on Inventory 61
Explanation:
[tex]\frac{COGS}{Average Inventory} = $Inventory Turnover[/tex]
where:
[tex]$Average Inventory=(Beginning Inventory + Ending Inventory)/2[/tex]
COGS: sales - COGS = gross profit
1,800,000 - COGS = 600,000
COGS: 1,800,000 - 600,000 = 1,200,000
Average Inventory: (160,000+240,000)/2 = 200,000
[tex]\frac{1,200,000}{200,000} = $Inventory Turnover[/tex]
Inventory TO 6
The invenotry is sold 6 times over the course of a year. As the year has 365 days we can divide by the TO to know how many days it takes to sale the inventory:
Days outstanding:
[tex]\frac{365}{Inventory TO} = $Days on Inventory[/tex]
[tex]\frac{365}{6} = $Days on Inventory[/tex]
Days on Inventory 61
