Big Foot Wholesalers has sales of $1,387,400, costs of goods sold of $891,400, inventory of $188,936, and accounts receivable of $94,800. How many days, on average, does it take the ﬁrm to
Sell its inventory assuming that all sales are on credit?

Question

Quizplus · Accepted Answer

First, we need to calculate the inventory turnover ratio using the formula:

Inventory Turnover Ratio = Cost of goods sold / Average Inventory

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

We don't have the beginning inventory, so we'll assume it's the same as the ending inventory. Therefore,

Average Inventory = ($188,936 + $188,936) / 2 = $188,936

Inventory Turnover Ratio = $891,400 / $188,936 = 4.72

Next, we can use the inventory turnover ratio to calculate days in inventory using the formula:

Days in Inventory = 365 days / Inventory Turnover Ratio

Days in Inventory = 365 days / 4.72 = 77.4 days

Therefore, it takes the firm on average 77.4 days to sell its inventory assuming all sales are on credit. Choice C is the best answer.

Big Foot Wholesalers Has Sales of $1,387,400, Costs of Goods