Question

Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales of $475,000. Carlos's days in inventory is: Select one:

a. 73 days.
b. 121.7 days.
c. 102.5 days.
d. 84.5 days.

Answer 1

b. 121.7 days.

Step-by-step explanation:

Days in inventory formula tells how many days a firm wait for its inventory to convert into sales.

So let us look at the formula of Days in Inventory;

Days in Inventory =
`(365)/(Inventory Turnover)`

To find the days in inventory first we need to find Inventory Turnover which can be calculated by the following formula;

Inventory Turnover =
`(COGS)/(Average Inventory)`

Inventory Turnover =
`(285,000)/(95,000)`

Inventory Turnover = 3 times

Lets put the value of Inventory Turnover in the Days in Inventory formula above, as;

Days in Inventory =
`(365)/(3)`

Days in Inventory = 121.7 days

This means that in a year the days it takes a Carlos Company to transform the inventory into finished goods is 121.7 days.