Turnbull Department Store had net credit sales of $18,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year amounted to $2,500,000. Inventory turnover for the year is

a. 365 days.

b. 48.7 days

c. 46 days

d. 30 days

The correct answer is 60.8 days

Explanation:

The formula for computing inventory rate is given as (Cost of Goods Sold/Average Inventory)

average inventory is $2,500,000

cost of goods sold is $15,000,000

inventory turnover rate = ($15,000,000/$2,500,000)

=6

Inventory turnover ratio=365/inventory turnover rate

inventory turnover ration=365/6

=60.8 days

None of the options is correct

Inventory turnover period = 60.8 days

Explanation:

The inventory turnover period also known as the inventory days is the average length of time it takes business to sell its stocks and replace same. The shorter the better as it indicates a high patronage from customers.

It is calculated as follows:

Inventory turnover = (Average inventory / cost of goods) * 365 days

= (2,500,000/15,000,000) * 365 days

= 60.83 days