Jordan Precision Welding had sales of $134,000 for the month of June.The company's gross profit was $36,000.The company had beginning inventory of $70,000, and a physical inventory count indicated that ending inventory was $66,000.What was the company's average number of days in inventory for June closest to?
A)177 days
B)246 days
C)253 days
D)266 days

Question

Quizplus · Accepted Answer

To find the average number of days in inventory, first calculate the cost of goods sold (COGS) using the formula: COGS = Beginning Inventory + Purchases - Ending Inventory. Here, Purchases = Sales - Gross Profit = $134,000 - $36,000 = $98,000. So, COGS = $70,000 + $98,000 - $66,000 = $102,000. Next, calculate the average inventory: (Beginning Inventory + Ending Inventory) / 2 = ($70,000 + $66,000) / 2 = $68,000. Finally, use the formula: Average Days in Inventory = (Average Inventory / COGS) * 365 = ($68,000 / $102,000) * 365 ≈ 243.53 days, which is closest to 253 days.

Jordan Precision Welding Had Sales of $134,000 for the Month