Question

Delmar Company had beginning inventory of $90,000, ending inventory of $110,000, cost of goods sold of $600,000, and sales of $960,000. Delmar's days in inventory is:

A) 38.0 days.
B) 54.3 days.
C) 60.8 days.
D) 67.5 days.

Answer 1

To calculate Delmar Company's days in inventory, the average inventory of $100,000 is divided by the cost of goods sold of $600,000, and the result is multiplied by 365, yielding approximately 60.8 days.

Step-by-step explanation:

The question is about calculating the days in inventory for Delmar Company given the beginning inventory, ending inventory, cost of goods sold, and sales amounts. The days in inventory formula is:

Days in Inventory = (Average Inventory / Cost of Goods Sold) × 365

To calculate the average inventory, we use the beginning inventory and ending inventory:

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

Average Inventory = ($90,000 + $110,000) / 2 = $100,000

Now we apply the average inventory into the days in inventory formula:

Days in Inventory = ($100,000 / $600,000) × 365 = 0.1667 × 365 ≈ 60.8 days

Therefore, the correct answer is C) 60.8 days.