Carey's Department Store had net sales of $20 million and cost of goods sold of $14 million for the year.The beginning inventory for the year was $3 million.The ending inventory for the year was $5 million.What was the days' inventory outstanding?
A)73
B)78
C)104
D)130

Question

Quizplus · Accepted Answer

Days' Inventory Outstanding (DIO) = (Average Inventory / Cost of Goods Sold) x 365

To find the average inventory, we add the beginning and ending inventory and divide by 2:

Average Inventory = (Beginning Inventory + Ending Inventory) / 2 
Average Inventory = ($3 million + $5 million) / 2 = $4 million

Now we can calculate the DIO:

DIO = ($4 million / $14 million) x 365
DIO = 104

Therefore, the answer is C) 104.

Carey's Department Store Had Net Sales of $20 Million and Cost