MANAGERIAL ACCOUTING LL WITH ACCESS
MANAGERIAL ACCOUTING LL WITH ACCESS
16th Edition
ISBN: 9781307670585
Author: Garrison
Publisher: MCG
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Chapter 15, Problem 10F15
To determine

Concept Introduction: Inventory Turnover and:

  • Inventory Turnover ratio is a measure of the number of times an entity’s inventory is replaced in a year with respect to the entity’s cost of goods sold.
  • It is essential to track the Inventory Turnover during a given period of time, such as a reporting period for Financial Statements, in order to see the strength of sales and volumes of sales and inventory rolled over during a reporting period.
  • The higher the Inventory Turnover ratio, the greater the strength of the company’s sales and more is the inventory sold during a reporting period.
  •   Inventory Turnover Ratio =Company's Cost of Goods Sold over the reporting periodAverage Balance of Inventory over the reporting period

Average Sale Period

  • Average Sale period is the Average number of days that it takes to sell the average inventory procured over the course of a reporting period.
  • Average Sale period is calculated in Days by dividing 365 Days by the Inventory turnover ratio.
  • Average Sale period helps in tracking the reconciliation between the average time that inventory is rolled over and costs of having inventory on hand
  •   Average Sale Period =365Inventory Turnover Ratio

To Compute:

Inventory Turnover and Average Sale Period

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