Question

A part of financial report of company Z is given below. Calculate days of supply for company Z.

Value of finished goods on-hand $2,930
Value of production materials on-hand $1,640
Value of work-in-process inventory $710
Cost of goods sold $12,500
Net revenue $24,800

a. More than 0 but less than or equal to 60
b. More than 60 but less than or equal to 100
c. More than 100 but less than or equal to 140
d. More than 140 but less than or equal to 200 More than 200

Answer 1

Company Z

The days of supply for Company Z are:

d. More than 140 but less than or equal to 200

Step-by-step explanation:

a) Data and Calculations:

Value of finished goods on-hand $2,930

Value of production materials on-hand $1,640

Value of work-in-process inventory $710

Total inventory = $5,280

Cost of goods sold $12,500

Net revenue $24,800

Days of Supply = Average Inventory/Cost of goods sold * 365

= $5,280/$12,500 * 365

= 154.2 days

b) The Inventory Days of Supply for Company Z or Days Inventory Outstanding" or Inventory Period measures the average number of days Company Z holds its inventory before selling it. As an efficiency ratio, the ratio measures the number of days Company Z's funds are held up in inventory before actual sales to customers.