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Use the following information: Net sales $220,000 Cost of goods sold 156,000 Beginning inventory 49,000 Ending inventory 39,000 a
Use the following information:
Net sales $220,000
Cost of goods sold 156,000
Beginning inventory 49,000
Ending inventory 39,000
a. Calculate the inventory turnover ratio. (Round your answer to 1 decimal place.)
b. Calculate the average days in inventory. (Assume 365 days in a year. Round your intermediate calculations and decimal place.)
Average days in inventory
days
c. Calculate the gross profit ratio. (Round your answer to 2 decimal place.)
Expert Solution
a.)
Average inventory= (49000+ 39000)/ 2
= 44000
Inventory Turnover ratio= Cost of goods sold/ Average inventory
= 156000/ 44000
= 3.55 times
b.)
Average days in inventory= No. of days in a year/ Inventory turnover ratio
= 365/ 3.55
= 102.82 days
c.)
Gross profit= Net sales- Cost of goods sold
= 220000- 156000
= 64000
Gross profit ratio= (Gross profit/ Net sales)* 100
= ( 64000/ 220000)* 100
= 29.09%
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