Question

The following information was available for the year ended December 31, 2022:

Cost of goods sold $ 646,050
Average inventory for the year 21,400
Inventory at year-end 43,350
Required:
Calculate the inventory turnover for 2022.
Calculate the number of days' sales in inventory for 2022, using year-end inventories.

Answer 1

The inventory turnover for 2022 is 30.19 times, and the number of days' sales in inventory using year-end inventories is approximately 24.54 days.

Step-by-step explanation:

The inventory turnover for 2022 is calculated by dividing the cost of goods sold (COGS) by the average inventory for the year. The formula is as follows:

Inventory Turnover = COGS / Average Inventory

Using the given values, we have:

Inventory Turnover = $646,050 / $21,400

Inventory Turnover = 30.19 times (rounded to two decimal places)

To calculate the number of days' sales in inventory, we use the year-end inventory and divide it by the daily COGS (COGS/365). The formula is:

Days' Sales in Inventory = (Ending Inventory / COGS) × 365

Using the given values, we have:

Days' Sales in Inventory = ($43,350 / $646,050) × 365

Days' Sales in Inventory = 24.54 days (rounded to two decimal places)