Handy Hardware sells its inventory in 85 days, on average. Costs of goods sold for the year are $631,800. What is the average value of the firm's inventory?
A) $114,706
B) $123,506
C) $147,132
D) $161,096
E) $182,513

Question

Quizplus · Accepted Answer

First, we need to calculate the inventory turnover ratio:

Inventory turnover = Cost of goods sold / Average inventory

We know that inventory turnover = 85 days, which can be converted to 365/85 = 4.2941 times per year.

Therefore, Average inventory = Cost of goods sold / Inventory turnover = $631,800 / 4.2941 = $146,935.98 (rounded to the nearest cent).

The closest answer choice to this value is C, $147,132. Therefore, the correct answer is C.

Handy Hardware Sells Its Inventory in 85 Days, on Average