Frontenac Corporation has just developed a new on-line ordering system with their primary supplier.They expect the new system to reduce their average number of days of inventory on hand from 42 days to 22 days.If their cost of goods sold was $642,000 last year and is expected to be about the same this year, how much smaller should their investment in inventory be this year?
A)$15,285
B)$32,100
C)$35,178
D)$38,695

Question

Quizplus · Accepted Answer

The reduction in inventory days is 42 - 22 = 20 days. The cost of goods sold per day is $642,000 / 365 = $1,759.21. The reduction in inventory investment is 20 days * $1,759.21 = $35,178.

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