For the year ended December 31, Depot Max's cost of merchandise sold was $56,900. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Depot Max's days' sales in inventory is closest to
A) 42
B) 46
C) 8
D) 44

Question

Quizplus · Accepted Answer

The formula to calculate days' sales in inventory is: $ \frac{Average Inventory}{Cost of Goods Sold} \times 365 $. First, calculate the average inventory: $ \frac{$6,540 + $7,250}{2} = $6,895 $. Then, divide the cost of merchandise sold by the average inventory and multiply by 365: $ \frac{$6,895}{$56,900} \times 365 \approx 44 $ days.

For the Year Ended December 31, Depot Max's Cost of Merchandise