Question

Mike's Sportswear Company, a retailer, had cost of goods sold of $420,000 last year. The beginning...

Mike's Sportswear Company, a retailer, had cost of goods sold of $420,000 last year. The beginning inventory balance was $31,000 and the ending inventory balance was $28,000. The company's average inventory turnover in days was closest to

a.26.94 days.

b.24.33 days.

c.51.27 days.

d.25.63 days.

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Answer #1

Answer: The correct answer if D i.e. 25.63 days

Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Average Inventory = ($31,000 + $28,000) / 2
Average Inventory = $59,000 / 2
Average Inventory = $29,500

Inventory Turnover = Cost of Goods Sold / Average Inventory
Inventory Turnover = $420,000 / $29,500
Inventory Turnover = 14.24

Average Inventory Turnover in Days = 365 days / Inventory Turnover
Average Inventory Turnover in Days = 365 / 14.24
Average Inventory Turnover = 25.63 days

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