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Home and Beyond company has sales of $2850, costs of goods sold of $2190, and accounts...

Home and Beyond company has sales of $2850, costs of goods sold of $2190, and accounts receivable of $433. If it takes 73 days on average to sell the inventory, what is the company’s average inventory

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Answer #1

Sales = 2,850

COGS = 2,190

Account Receivable = 433

DIO or Days Inventory Outstanding = 73 days

Using DIO formula: DIO = Average Inventory / (COGS / Total Days)

Assuming 365 days as Total number of periods (some people use 360 days)

=> 73 = Avg Inventory / (2190 / 365)

=> Avg Inventory = 73 * 2190 / 365

Average Inventory = $ 438

If we change the number of days to 360, then

Average Inventory = 73 * 2190 / 360 = $ 444.1

Since the number of days to be considered in not specified, hence, answer has been calculated using both widely followed practices. Please consider the answer that is line with your institution practices. Thanks.

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