Question

Suppose at December 31 of a recent year, the following information (in thousands) was available for sunglasses manufacturer Oakley Inc.: ending inventory $156,748; beginning inventory $108,738; cost of goods sold $348,930 and sales revenue $757,813.

Required:
a. Calculate the inventory turnover for Oakley, Inc. (Round inventory turnover to 2 decimal places, e.g. 5.12.)
b. Calculate the days in inventory for Oakley, Inc. (Round days in inventory to 0 decimal places, e.g. 125.)

Answer 1

a. 2.63

b. 139 days

Step-by-step explanation:

a. Inventory Turnover is a ratio that measures how often inventory is replaced by a company. A higher ratio is good because it means that the company is selling more.

Formula;

=
`(Cost of Goods Sold)/( (Beginning Inventory + Closing Inventory)/(2) )`

=
`(348,930)/( (108,738 + 156,748)/(2) )`

=
`(348,930)/(132,743)`

= 2.63

b. Days in Inventory refers to the amount of time that stock remains in the company before it is sold. This is preferred to be lower as opposed to higher.

=
`(365)/(Inventory Turnover Ratio)`

=
`(365)/(2.63)`

= 138.78

= 139 days