Asked by Abdul Rahman Aljajah on Apr 25, 2024
Verified
What was the average number of days to sell inventory? (Assume 365 days in a year. )
A) 165.9
B) 202.7
C) 182.5
D) 121.7
Days To Sell
An estimate of the average number of days it takes for a company to sell its inventory.
Inventory
A complete list of items such as property, goods in stock, or the contents of a building.
- Analyze inventory management efficiency through the inventory turnover ratio and average days to sell inventory.
Verified Answer
PH
Pablo Hassid8 days ago
Final Answer :
C
Explanation :
The formula for calculating days to sell inventory is:
Days to Sell Inventory = (Average Inventory / Cost of Goods Sold) x 365
We do not have data for the cost of goods sold, so we cannot use the formula directly. However, we have data for inventory turnover ratio, which is defined as:
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Rearranging the formula, we get:
Average Inventory = Cost of Goods Sold / Inventory Turnover Ratio
Substituting the given values:
Inventory Turnover Ratio = 8 times per year
Cost of Goods Sold = $4,000,000
Average Inventory = 4,000,000 / 8 = $500,000
Now we can calculate the days to sell inventory:
Days to Sell Inventory = (500,000 / 4,000,000) x 365 = 45.625
Therefore, the average number of days to sell inventory is approximately 182.5 (rounded to one decimal place). The best choice is C.
Days to Sell Inventory = (Average Inventory / Cost of Goods Sold) x 365
We do not have data for the cost of goods sold, so we cannot use the formula directly. However, we have data for inventory turnover ratio, which is defined as:
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Rearranging the formula, we get:
Average Inventory = Cost of Goods Sold / Inventory Turnover Ratio
Substituting the given values:
Inventory Turnover Ratio = 8 times per year
Cost of Goods Sold = $4,000,000
Average Inventory = 4,000,000 / 8 = $500,000
Now we can calculate the days to sell inventory:
Days to Sell Inventory = (500,000 / 4,000,000) x 365 = 45.625
Therefore, the average number of days to sell inventory is approximately 182.5 (rounded to one decimal place). The best choice is C.
Learning Objectives
- Analyze inventory management efficiency through the inventory turnover ratio and average days to sell inventory.