Asked by Talia Miller on Jul 30, 2024
Verified
For the year ended December 31, Depot Max's cost of goods sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Depot Max's number of days' sales in inventory is closest to
A) 42
B) 46
C) 8
D) 44
Days' Sales in Inventory
A financial ratio indicating the average time it takes for a company to turn its inventory into sales.
Cost of Goods Sold
The total cost of manufacturing or acquiring the products sold by a business during a particular period, including labor, materials, and overhead expenses.
Ending Inventory
The overall value of commodities poised for sale at the termination of an accounting period.
- Compute balances of inventory, expenses related to goods sold, and metrics for inventory turnover.
- Assess the efficiency and effectiveness of inventory management through specific metrics.
Verified Answer
ZK
Zybrea KnightAug 01, 2024
Final Answer :
D
Explanation :
The number of days' sales in inventory is calculated as (Ending Inventory / Cost of Goods Sold) * 365. First, find the average inventory: (Beginning Inventory + Ending Inventory) / 2 = ($6,540 + $7,250) / 2 = $6,895. Then, calculate the days' sales in inventory: ($6,895 / $56,900) * 365 ≈ 44 days.
Learning Objectives
- Compute balances of inventory, expenses related to goods sold, and metrics for inventory turnover.
- Assess the efficiency and effectiveness of inventory management through specific metrics.