Question

Blue Moon Inc. in 2014 had ending inventory of $435,000, sales of $4,215,000, and cost of goods sold at $2,139,000. Then, the days' sales in inventory is _______ days; that is, a unit of inventory sat on the shelf for ______ days on average before it was sold.

Hint: First compute the inventory turnover ratio and then use it to compute the days' sales in inventory.

Answer 1

Blue Moon Inc. in 2014 had ending inventory of $435,000, sales of $4,215,000, and cost of goods sold at $2,139,000. Then, the days' sales in inventory is 74.23 days; that is, a unit of inventory sat on the shelf for 74.23 days on average before it was sold.

Inventory turnover = COGS / Inventory

Inventory turnover = $2,139,000 / $435,000 = 4.92 times

Days' sales in inventory = 365 days / Inventory turnover = 365 / 4.92 = 74.23 days On average, a unit of inventory sat on the shelf 74.23 days before it was sold.