BL Industries has ending inventory of $302,800, annual sales of $2.33 million, and annual cost of goods sold of $1.41 million. On average, how long did a unit of inventory sit on the shelf before it was sold?
A) 47.43 days
B) 22.18 days
C) 78.38 days
D) 61.78 days
E) 83.13 days

Question

Quizplus · Accepted Answer

First, we need to calculate the average inventory by dividing the ending inventory by 2.

Average inventory = $302,800 / 2 = $151,400

Then, we can calculate inventory turnover by dividing cost of goods sold by average inventory.

Inventory turnover = $1,410,000 / $151,400 = 9.32

Next, we can calculate the days inventory held by dividing 365 by the inventory turnover.

Days inventory held = 365 / 9.32 = 39.18

Therefore, on average, a unit of inventory sat on the shelf for about 39 days.

Choice C (78.38 days) is the closest option, but it is clearly incorrect, as it is almost twice the correct value.

BL Industries Has Ending Inventory of $302,800, Annual Sales of $2.33