ExpertMedium2 marksShort Answer
ACCA · Question 34 · Interpretation of Financial Statements
A company has Cost of Sales of $1,460,000 for the year. Its opening inventory was $200,000 and closing inventory is $280,000. Assuming a 365-day year, what is the inventory turnover period in days? (Use average inventory. Enter the number only)
A company has Cost of Sales of $1,460,000 for the year. Its opening inventory was $200,000 and closing inventory is $280,000. Assuming a 365-day year, what is the inventory turnover period in days? (Use average inventory. Enter the number only)
How to approach this question
Calculate Average Inventory. Then use the formula: (Average Inventory / Cost of Sales) * 365.
Full Answer
Average Inventory = ($200,000 + $280,000) / 2 = $240,000. Inventory Turnover Days = (Average Inventory / Cost of Sales) × 365 = ($240,000 / $1,460,000) × 365 = 60 days.
Common mistakes
Using only closing inventory instead of average inventory, or dividing by Revenue instead of Cost of Sales.
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