Question

Tinker’s cost of goods sold in the year of sale (2016) was $770,000 and 2015 cost of goods sold was $790,000. The inventory at the end of 2016 was $190,000 and at the end of 2015 the inventory was $210,000. Tinker’s average number of days to sell its inventory during 2016 is closest to: (Use 365 days a year. Do not round intermediate calculations.)

92.41 days

90.06 days

97.03 days

94.81 days

Answer 1

Tinker’s average number of days to sell its inventory for 2016 is closest to 94.81 Days

Workings

Average number of days to sell its inventory = 365 Days / Inventory Turnover ratio

Inventory Turnover ratio = Cost of goods sold / Average Inventory

                                      = $770,000 / [ ($190,000 + 210,000) / 2 ]

                                      = $770,000 = $200,000

                                      = 3.85 Times

Therefore, Average number of days to sell its inventory

= 365 Days / 3.85

= 94.81 Days