Question

Question content area for the year ended december 31, depot max’s cost of goods sold was $56,900. inventory at the beginning of the year was $6,540. ending inventory was $7,250. depot max’s days' sales in inventory is closest to?

1) 4.5
2) 5.2
3) 6.8
4) 7.6

Answer 1

Depot Max's days' sales in inventory is closest to 4.5.

Step-by-step explanation:

To calculate Depot Max's days' sales in inventory, we need to use the formula:

Days' Sales in Inventory = (Average Inventory / Cost of Goods Sold) x 365

First, we need to find the average inventory by adding the beginning inventory and ending inventory and then dividing by 2:

Average Inventory = (Beginning Inventory + Ending Inventory) / 2 = ($6,540 + $7,250) / 2 = $6,895

Then, we can calculate the days' sales in inventory:

Days' Sales in Inventory = ($6,895 / $56,900) x 365 = 44.56

So, the closest option to Depot Max's days' sales in inventory is 4.5 (option 1).