Question

BL Industries has ending inventory of 302,800 and cost of goods sold for the year just ended was 1.41 million. On average, how long did a unit of inventory sit on the shelf before it was sold?

Answer 1

To determine how long a unit of inventory sat on the shelf before it was sold, we can use the average inventory turnover ratio. In this case, the average inventory turnover ratio is 5.61.

Step-by-step explanation:

To determine how long a unit of inventory sat on the shelf before it was sold, we can use the average inventory turnover ratio. The formula is:

Average Inventory Turnover = Cost of Goods Sold / Average Inventory

In this case, the cost of goods sold is $1.41 million and the ending inventory is $302,800. To find the average inventory, we can use the formula:

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

Let's say the beginning inventory is $200,000. Plugging in the values, we have:

Average Inventory = (200,000 + 302,800) / 2 = 251,400

Now, we can calculate the average inventory turnover ratio:

Average Inventory Turnover = 1,410,000 / 251,400 = 5.61

This means, on average, a unit of inventory sat on the shelf for approximately 5.61 times before it was sold.