US CMA Part 2 · Chapter 1 · Question 8 of 15
Fenwick Hardware reported cost of goods sold of $1,512,000. Inventory was $240,000 at the start of the year and $192,000 at the end. Using average inventory and a 365-day year, what are the inventory turnover and days inventory outstanding?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 7.0 times; 52.1 days
Explanation
Average inventory = ($240,000 + $192,000) / 2 = $216,000. Inventory turnover = $1,512,000 / $216,000 = 7.0 times. Days inventory outstanding = 365 / 7.0 = 52.1 days (rounded to one decimal). The distractors use only ending or only beginning inventory, or double the days figure.
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