Middleton's has sales for the year of $311,400, cost of goods sold equal to 74 percent of sales, and an average inventory of $42,800. The profit margin is 6 percent and the tax rate is 34 percent. How many days on average does it take the firm to sell an inventory item?

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Quizplus · Accepted Answer

The inventory turnover ratio is calculated as Cost of Goods Sold (COGS) divided by Average Inventory. COGS is 74% of sales, which is $311,400 * 0.74 = $230,436. The inventory turnover ratio is $230,436 / $42,800 = 5.38. The days in inventory is 365 / 5.38 = 67.79 days.

Middleton's Has Sales for the Year of $311,400, Cost of Goods