Question

Barron Industries has the following information:

Sales Revenue $ 300,000
Ending inventory 30,000
Cost of Goods Sold 200,000
Beginning inventory 25,000

What is Barron's number of days to sell?
A) 33.5 days
B) 36.5 days
C) 50.2 days
D) 54.8 days

Answer 1

Barron Industries' average inventory is $27,500, and the inventory turnover rate is 7.27 times per year, leading to 50.2 days as the correct number of days to sell inventory. The calculation used the formulas for average inventory and inventory turnover rate.

Step-by-step explanation:

The student has to calculate Barron Industries' number of days to sell inventory using the given data: Sales Revenue $300,000, Ending inventory $30,000, Cost of Goods Sold $200,000, and Beginning inventory $25,000. The average inventory can be computed as (Beginning Inventory + Ending Inventory) / 2 = ($25,000 + $30,000) / 2 = $27,500. Next, the Inventory Turnover Rate is found by dividing the Cost of Goods Sold by the average inventory: $200,000 / $27,500 = 7.27 times per year. The number of days to sell, also known as days' sales in inventory, is calculated by dividing the number of days in the year, 365, by the inventory turnover rate: 365 / 7.27 = 50.2 days. Therefore, the correct answer is C) 50.2 days.