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The Opa's Carving Shop had the following financial data for the year ended December 31​, 2018​:

Cost of Goods Sold $484,000
Beginning Merchandise Inventory 88,800
Ending Merchandise Inventory 111,200

What are the inventory turnover and​ days' sales in inventory for the​ year? Compute Opa's Carving Shop​'s inventory turnover for the year.

Respuesta :

Answer:

Inventory turnover = 4.84 times.

Days Sales in inventory = 75.41 days.

Explanation:

Inventory turnover ratio: Shows that how many times company has sold it's inventory.

  • Formula:

[tex]Inventory Turnover=\frac{COGS}{AverageInnventory}[/tex]

  • Formula for Average Inventory:

[tex]Average Inventory =\frac{BeginingInventory + Ending Inventory}{2}[/tex]

  • Given Data:

COGS = $484,000

Average Inventory = [tex]=\frac{88,800 + 111,200}{2} = 100,000[/tex]

  • Substituting values in the formula of Inventory Turnover:

[tex]Inventory Turnover=\frac{484,000}{100,000} = 4.84 times.[/tex]

In the given year Opa has turned (sold or replaced) it's inventories 4.84 times.

Days Sales in Inventory (DSI): It represents the number of days the company took to turn (sell or replace) it's inventory.

  • Formula:

[tex]DSI= \frac{AverageInvetory}{COGS}* 365 days[/tex]

  • Given Data:

COGS = $484,000

Average Inventory = 100,000

  • Substituting values in the formula of DSI:

[tex]DSI= \frac{100,000}{484,000}* 365 days = 75.41 days[/tex]

It took almost 75 days for Opa to turn(Sell or replace) it's inventory.