The souvenir shop in a hotel foyer incurred $60,000 in cost of sales when generating sales of $140,000 last year. Its inventory account balance was $2,500 at the start of the year and $3,500 at the end of the year.
The merchandise sold was held in the shop's inventory for how many days on average during the year (assume a 360-day year)?

Question

Quizplus · Accepted Answer

The average inventory is ($2,500 + $3,500) / 2 = $3,000. The inventory turnover is $140,000 / $3,000 = 46.67 times per year. The average days of inventory on hand is 360 days / 46.67 times = 18 days.

The Souvenir Shop in a Hotel Foyer Incurred $60,000 in Cost