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Assume a firm's inventory level of $13,500 represents 37 days' sales
Assume a firm's inventory level of $13,500 represents 37 days' sales.
Required:
a. What is the annual cost of goods sold? (Use 365 days in a year. Do not round intermediate calculations. Round your answer to whole number.)
b. What is the inventory turnover ratio? (Round your answer to 2 decimal places.)
Expert Solution
a). Computation of the annual cost of goods sold:-
Days sales in Inventory = Inventory * 365 / Cost of goods sold
37 = $13,500 * 365 / Cost of goods sold
Cost of goods sold = $13,500 * 365 / 37
= $133,175.68 Or $133,176
b). Computation of the inventory turnover ratio:-
Inventory turnover ratio = Days in year / Days sales in inventory
= 365 / 37
= 9.86 times
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