Average production cycle. Use the following account information for Rian Company

Question

Average production cycle. Use the following account information for Rian Company 2013 and 2014 Selected Balance Sheet Accounts of Rian Company Accounts receivable Inventory$19,370 Accounts payable 12/31/14 $27,999 $40,033 12/31/13 $33,977 $43,072 $18,166 $5,978 $3,039 $1,204 2014 Selected Income Statement Items for Rian Company Cash sales Credit sales Total sales Cost of goods sold $400,386 $314,000 $400,000 $714,000 If the target ending inventory for 2015 is $44,306, what cost of goods sold will the company need to reach its goal? s(Round to the nearest dollar) Enter your answer in the answer box.

Explanation / Answer

Inventory Day in 2014 = $40,033 / ($400,386 / 365)

= $40,033 / $1,096.95)

= 36.50 days,

Inventory day in 2014 is 36.50 days.

Now, if target inventory is $44,306 and Inventory days remains constant.

Then cost of goods sold = ($44,306 / 36.50) × 365

= $443,122.

if target inventory is $44,306 and Inventory days remains constant, then cost of goods sold would be $443,122.

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