Question

The Morden Corporation has ending inventory of $483,167, and cost of goods sold for the year...

The Morden Corporation has ending inventory of $483,167, and cost of goods sold for the year just ended was $4,285,131.

What is the inventory turnover? (Round the final answer to 2 decimal places.)

Inventory turnover             times

What is the days' sales in inventory? (Use 365 days a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Days' sales in inventory              days

How long on average did a unit of inventory sit on the shelf before it was sold? (Use 365 days a year. Round the final answer to 2 decimal places.)

Inventory days on shelf             days

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Answer #1

Inventory turnover is one of the important efficiency ratios for a company which shows how many times was the inventory sold in a year. If it is more, it shows that company is selling more as a percentage of its inventory. An increase is generally good.

Inventory turnover = cost of goods sold/inventory

= 4,285,131/483,167 = 8.86884

Thus, inventory turnover is 8.87 times

Days sales in inventory = 365/inventory turnover = 365/8.86884 = 41.1553 days

Days sales in inventory is 41.16 days

Inventory days on shelf = average inventory*365/cost of goods sold

= 483,167*365/4,285,131 = 41.1553 days

Inventory days on shelf is 41.16 days.

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