Irawaddy Company, a retailer, had cost of goods sold of $463,500 last year. The

Question

Irawaddy Company, a retailer, had cost of goods sold of $463,500 last year. The beginning inventory balance was $51,000 and the ending inventory balance was $52,000. The company's average sale period was closest to: (Assume 365 days a year.)

9.00 days

0.02 days

2.49 days

40.60 days

Irawaddy Company, a retailer, had cost of goods sold of $463,500 last year. The beginning inventory balance was $51,000 and the ending inventory balance was $52,000. The company's average sale period was closest to: (Assume 365 days a year.)

Explanation / Answer

Average inventory=(Beginning inventory+Ending inventory)/2

=(51000+52000)/2=$51500

Hence average sale period=(Average inventory/COGS)*365 days

which is equal to

=(51500/463500)*365 days

which is equal to

=40.6 days(Approx)(D).

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