Question

Brooke Industries has sales of $860,000 and the cost of goods sold of $490,000. The firm had a beginning inventory of $98,000 and an ending inventory of $112,000. What is the length of the inventory period?

A. 4.67 days
B. 5.21 days
C. 44.56 days
D. 78.21 days
E. 21.59 days

Answer 1

The length of the inventory period for Brooke Industries is calculated using average inventory and cost of goods sold per day, leading to an inventory period of approximately D. 78.21 days.

Step-by-step explanation:

The length of the inventory period is calculated by dividing the average inventory by the cost of goods sold (COGS) per day. Average inventory is computed by taking the sum of the beginning and ending inventory values and dividing by two, which in this case is ($98,000 + $112,000) / 2 = $105,000. The COGS per day is computed by dividing the COGS by the number of days in the year (assuming 365 days a year), which is $490,000 / 365 = $1,342.47 per day.

The inventory period is then calculated by dividing the average inventory by the COGS per day. Therefore, the inventory period is $105,000 / $1,342.47 = 78.192 days. This number can be rounded to two decimal places, giving us the length of the inventory period as approximately 78.21 days.

So, the correct answer to the length of the inventory period for Brooke Industries is 78.21 days (Option D).