Question

Brook Side reported sales of $738,000 and cost of goods sold of $584,000 for the year. The firm had a beginning inventory of $51,000 and an ending inventory of $46,000. What is the length of the inventory period?

Answer 1

The length of the inventory period is 30.32 days.

Step-by-step explanation:

For computing the length of the inventory period, first we have to compute the inventory turnover ratio

The formula for inventory turnover ratio is shown below

= Cost of good sold ÷ Average inventory

where,

Average inventory = (Opening inventory + ending inventory) ÷ 2

= ($51,000 + 46,000) ÷ 2

= $48,500

And, the cost of good sold is $584,000

Now put these values on the above formula

So, the inventory turnover ratio is

= $584,000 ÷ $48,500

= 12.04 times

The length would be equal to

= Total Number of days in a year ÷ inventor turnover ratio

= 365 ÷ 12.04

= 30.32 days

Hence, the length of the inventory period is 30.32 days.