Chapter 7 Quz Question 6 (of 6) value 0.85 points M7-13 Calculating the Inventor
ID: 2547410 • Letter: C
Question
Chapter 7 Quz Question 6 (of 6) value 0.85 points M7-13 Calculating the Inventory Turnover Ratio and Days to Sell [LO 7.5] Complete the following table. (Use 365 days in a year. Round the inventory turnover ratio to one decimal place before computing days to sell. Round days to sell to one decimal place.) Bl Purchases CGS El to Sell Turnover Ratio Days 1,180 $ 280 S 270 1.140 1,920 1,720 b. 9.6 C. 60 21.2 References Worksheet M7-13 and Days to Sell LO 7-5) Calculating the Inventory Turnover RatioExplanation / Answer
Average Inventory= Beginning Inventory + Ending inventory/2
Inventory Turnover Ratio= Cost of Goods Sold/ Average Inventory
Day to sell =No of days for period/ Inventory Turnover Ratio
Case 1: Ending inventory(EI) = Beginning Inventory (BI)+ Purchase - Cost of Goods Sold (CGS)
= 280 + 1180 - 1140 = 320
Average inventory = (BI+EI)/2
=(280+320)/2= 300
Inventory Turnover ratio = CGS/ Average Inventory
= 1140/300= 3.80
Days to Sell = 365/ Inventory Turnover ratio
= 365 / 3.8
= 96 Days
CASE 2=
Inventory Turnover ratio = CGS/ Average Inventory
9.6 = 1920 / (270 + EI)/2
270 + EI = 2 * (1920/9.6)
EI = 400 - 270 = 130
Days to Sell = 365/ Inventory Turnover ratio
= 365 / 9.6
= 38 Days
Purchase = Ending inventory(EI) - Beginning Inventory (BI)+ Cost of Goods Sold (CGS)
= 270 - 130 + 1920
= 2060
CASE 3 =
Days to Sell = 365/ Inventory Turnover ratio
21.2 = 365 / Inventory Turnover ratio
Inventory Turnover ratio = 17.2
Inventory Turnover ratio = CGS/ Average Inventory
17.2 = 1720 / (BI + 60)/2
BI + 60 = 2*(1720 / 17.2)
BI = 200 - 60
BI = 140
Purchase = Ending inventory(EI) - Beginning Inventory (BI)+ Cost of Goods Sold (CGS)
= 60 + 140 1720
= 1920
Case BI Purchases CGS EI Inventory Turnover Ratio Days to Sell a. 280 1180 1140 320 3.8 96 b. 270 1920 130 7.2 38 c. 140 1920 1,240 120 17.2 29.4