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28 August, 09:17

Brook Side reported sales of $738,000 and cost of goods sold of $584,000 for the year. The firm had a beginning inventory of $51,000 and an ending inventory of $46,000. What is the length of the inventory period?

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  1. 28 August, 10:36
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    The length of the inventory period is 30.32 days.

    Explanation:

    For computing the length of the inventory period, first we have to compute the inventory turnover ratio

    The formula for inventory turnover ratio is shown below

    = Cost of good sold : Average inventory

    where,

    Average inventory = (Opening inventory + ending inventory) : 2

    = ($51,000 + 46,000) : 2

    = $48,500

    And, the cost of good sold is $584,000

    Now put these values on the above formula

    So, the inventory turnover ratio is

    = $584,000 : $48,500

    = 12.04 times

    The length would be equal to

    = Total Number of days in a year : inventor turnover ratio

    = 365 : 12.04

    = 30.32 days

    Hence, the length of the inventory period is 30.32 days.
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