Your firm's cost of goods sold (COGS)average $2,000,000 per month,and it keeps inventory equal to 50% of its monthly COGS on hand at all times.Using a 365-day year,what is its inventory conversion period?

Question

Quizplus · Accepted Answer

First, we need to calculate the firm's inventory level:
50% x $2,000,000 = $1,000,000

Next, we need to convert the inventory level to days:
$1,000,000 ÷ (365 ÷ 12) = $32,877

Finally, we need to divide by the firm's COGS to get the inventory conversion period:
$32,877 ÷ $2,000,000 = 0.0164 or 16.4 days

Therefore, the inventory conversion period is 15.2 days (rounded to one decimal place).

Your Firm's Cost of Goods Sold (COGS)average $2,000,000 Per Month,and