For the year ended December 31, 2011 Depot Max's cost of merchandise sold was $54,350. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Depot Max's number of days sales in inventory is closest to
A) 43
B) 50
C) 8
D) 47

Question

Quizplus · Accepted Answer

To calculate the number of days sales in inventory, we need to use the formula:

Number of days sales in inventory = (Average inventory / Cost of merchandise sold) x 365

First, let's find the average inventory:

Average inventory = (Beginning inventory + Ending inventory) / 2
Average inventory = ($6,540 + $7,250) / 2
Average inventory = $6,895

Now we can plug in the values into the formula:

Number of days sales in inventory = ($6,895 / $54,350) x 365
Number of days sales in inventory = 46.38 days, which is closest to 47 days (option D)

For the Year Ended December 31, 2011 Depot Max's Cost