Question

stoney brooke, incorporated, has sales of $1,040,000 and cost of goods sold of $838,300. the firm had a beginning inventory of $43,000 and an ending inventory of $58,000. what is the length of the inventory period? assume 365 days per year.

Answer 1

The length of the inventory period for Stoney Brooke, Inc. is approximately 22 days, which is calculated using the average inventory, the inventory turnover ratio, and the days' inventory outstanding.

Step-by-step explanation:

To determine the length of the inventory period for Stoney Brooke, Inc., you use the formula for the average days' inventory on hand, which calculates how long, on average, the inventory stays in the company before it is sold. The formula is:

Average Inventory = (Beginning Inventory + Ending Inventory) / 2

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Days' Inventory Outstanding = 365 / Inventory Turnover Ratio

In this case, the average inventory is ($43,000 + $58,000) / 2 = $50,500. The Inventory Turnover Ratio then is $838,300 / $50,500, which is approximately 16.60. Finally, the Days' Inventory Outstanding is 365 / 16.60, approximately 21.99 days.

Thus, the length of the inventory period for Stoney Brooke, Inc. is approximately 22 days.