Inventory Analysis The following data were extracted from the income statement o

Question

Inventory Analysis The following data were extracted from the income statement of Brecca Systems Inc.: Current Year Previous Year Sales Beginning inventories Cost of goods sold Ending inventories a. Determine for each year (1) the inventory turnover and (2) the number of days' sales in inventory. Round interim calculations to the nearest dollar and the final answers to one decimal place. Assume 365 days a year. $1,445,400 $1,511,100 71,116 722,700 64,316 98,580 839,500 71,116 Current Year Previous Year 1. Inventory turnover 2. Number of days' sales in inventory b. The inventory position of the business has improved days days . The inventory turnover has increased , while the number of days' sales in inventory has decreased

Explanation / Answer

Calculate following :

b) The inventory position of the business has improved. The inventory turnover has increased while the number of days sales in inventory has decreased.

Current year previous year Average inventory (71116+64316/2) = 67716 (98580+71116/2) = 84848 Inventory turnover 722700/67716 = 10.7 839500/84848 = 9.9 Number of days' sales in inventory 365/10.7 = 34.1 days 365/9.9 = 36.9 Days

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