Pascarelli Corporation's inventory at the end of Year 2 was $122,000 and its inventory at the end of Year 1 was $150,000.Cost of goods sold amounted to $870,000 in Year 2.The company's average sale period for Year 2 is closest to:

A) 230.1 days
B) 51.2 days
C) 57.0 days
D) 32.3 days

Question

harmandeep singh · Accepted Answer

Final Answer : C, Explanation :  To find the average sale period, we need to use the inventory turnover ratio formula:Inventory turnover ratio = Cost of goods sold / Average inventoryWe are given the cost of goods sold as $870,000 for Year 2. To calculate the average inventory, we can take the average of the inventory at the end of Year 2 and Year 1:Average inventory = (Inventory at end of Year 2 + Inventory at end of Year 1) / 2Average inventory = ($122,000 + $150,000) / 2Average inventory = $136,000Now we can plug in the values into the formula:Inventory turnover ratio = $870,000 / $136,000Inventory turnover ratio = 6.397The inventory turnover ratio tells us how many times the inventory is sold and replaced in a year. To find the average sale period, we need to divide 365 (number of days in a year) by the inventory turnover ratio:Average sale period = 365 / Inventory turnover ratioAverage sale period = 365 / 6.397Average sale period = 57.1 daysTherefore, the closest option is C) 57.0 days. Inventory turnover = Cost of goods sold ÷ Average inventory*= $870,000 ÷ $136,000 = 6.40 (rounded)*Average inventory =($122,000 + $150,000)÷ 2 = $136,000Average sale period = 365 days ÷ Inventory turnover= 365 days ÷ 6.40 = 57.0 days (rounded)

Pascarelli Corporation's inventory at the end of Year 2 was $122,000 and its inventory at the end of Year 1 was $150,000.Cost of goods sold amounted to $870,000 in Year 2.The company's average sale period for Year 2 is closest to:

A) 230.1 days
B) 51.2 days
C) 57.0 days
D) 32.3 days

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Pascarelli Corporation's inventory at the end of Year 2 was $122,000 and its inventory at the end of Year 1 was $150,000.Cost of goods sold amounted to $870,000 in Year 2.The company's average sale period for Year 2 is closest to:A) 230.1 daysB) 51.2 daysC) 57.0 daysD) 32.3 days

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Related questions

Pascarelli Corporation's inventory at the end of Year 2 was $122,000 and its inventory at the end of Year 1 was $150,000.Cost of goods sold amounted to $870,000 in Year 2.The company's average sale period for Year 2 is closest to:

A) 230.1 days
B) 51.2 days
C) 57.0 days
D) 32.3 days