Question

The following data were taken from Castle, Inc. Cost of goods sold $894,000 Inventory, end of year 78,000 Inventory, beginning of the year 92,000 What is (1) the inventory turnover ratio and (2) the number of days' sales in inventory for Castle Inc.

Answer 1

1. 10.52 times

2. 34.70 days

Step-by-step explanation:

(1) the inventory turnover ratio

the inventory turnover ratio = Cost of goods sold ÷ Average Inventory

= $894,000 ÷ ( $92,000 + $ 78,000)/2

= 10.52 times

(2) the number of days' sales in inventory

number of days' sales in inventory = Average Inventory ÷ (Cost of goods sold/365)

= $85,000 ÷ ($894,000 /365)

= 34.70 days

Answer 2

Answer: Inventory turnover ratio =10.52

Days sale inventory =34.70 days

Step-by-step explanation:

Inventory turnover ratio = Cost of goods sold / Average inventory for same period

First Calculating Average inventory, we have that

Beginning inventory+ Ending inventory / 2

= ($92000 + $78000)/2 = $170,000 /2 = $85,000

Therefore, Inventory turnover ratio = $894, 000 / $85,000 = 10.5178 rounded to 10.52

2) Days' sale inventory = 365 / Inventory turnover ratio

= 365 / 10.52 = 34.70 days