Chapter 13, Problem 13.12BE

(a)

To determine

Inventory Turnover Ratio

Inventory turnover ratio: Inventory turnover ratio is used to determine the number of times inventory used or sold during the particular accounting period.

Formula:

$\text{Inventory turnover}=\frac{\text{Cost of goods sold}}{\text{Average inventory}}$

Days’ in inventory:  Days’ in inventory are used to determine number of days a particular company takes to make sales of the inventory available with them.

Formula:

$\text{Days' in inventory}=\frac{\text{Days in accounting period}}{\text{Inventory turnover}}$

To compute; Inventory turnover ratio for the year 2013 and 2014.

(b)

To determine

To compute: Days in i nventory for the year 2013 and 2014.