The following data were taken from Castle, Inc.Cost of goods sold $894,000
Inventory, end of year
78,000
Inventory, beginning of the year
92,000
What is (1) the inventory turnover ratio and (2) the number of days' sales in inventory for Castle Inc.

A) (1) 11.46 times (2) 31.85 days
B) (1) 10.52 times (2) 34.70 days
C) (1) 9.72 times (2) 37.56 days
D) (1) 10.53 times (2) 34.56 days

Question

Janna Meyer · Accepted Answer

Final Answer : B, Explanation :  The inventory turnover ratio is calculated as Cost of Goods Sold / Average Inventory. Average Inventory = (Beginning Inventory + Ending Inventory) / 2 = (92,000 + 78,000) / 2 = 85,000. Inventory Turnover Ratio = 894,000 / 85,000 = 10.52. Days' sales in inventory = 365 / Inventory Turnover Ratio = 365 / 10.52 ≈ 34.70 days.

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