Question

For the current year, Delta Corporation has beginning and ending inventories of $80,000 and $100,000, respectively. The cost of goods sold for the year is $450,000. What is the company's average days in inventory?

Option 1: 4.5 days
Option 2: 73 days
Option 3: 5 days
Option 4: 64.9 days

Answer 1

To find Delta Corporation's average days in inventory, calculate the average inventory and inventory turnover, then use these figures to determine the average days. The calculated average days in inventory for Delta Corporation is 73 days, which is Option 2.

Step-by-step explanation:

To calculate the average days in inventory, we use the formula:

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

Inventory Turnover = Cost of Goods Sold / Average Inventory

Average Days in Inventory = 365 / Inventory Turnover

Let's apply the data from Delta Corporation:

Beginning Inventory = $80,000

Ending Inventory = $100,000

Cost of Goods Sold = $450,000

Average Inventory = ($80,000 + $100,000) / 2 = $90,000

Inventory Turnover = $450,000 / $90,000 = 5

Now, we can find the average days in inventory:

Average Days in Inventory = 365 / 5 = 73 days

Therefore, the company's average days in inventory is 73 days, which corresponds to Option 2.