Agnes Company reported the following data:
- What was the average number of days to sell inventory? (Assume 365 days in a year. )
A)165.9
B)202.7
C)182.5
D)121.7

Question

Agnes Company reported the following data: 
- What was the average number of days to sell inventory? (Assume 365 days in a year. )
A)165.9 
B)202.7 
C)182.5 
D)121.7

Quizplus · Accepted Answer

The formula for calculating days to sell inventory is:
Days to Sell Inventory = (Average Inventory / Cost of Goods Sold) x 365

We do not have data for the cost of goods sold, so we cannot use the formula directly. However, we have data for inventory turnover ratio, which is defined as:

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Rearranging the formula, we get:

Average Inventory = Cost of Goods Sold / Inventory Turnover Ratio

Substituting the given values:

Inventory Turnover Ratio = 8 times per year
Cost of Goods Sold = $4,000,000

Average Inventory = 4,000,000 / 8 = $500,000

Now we can calculate the days to sell inventory:

Days to Sell Inventory = (500,000 / 4,000,000) x 365 = 45.625

Therefore, the average number of days to sell inventory is approximately 182.5 (rounded to one decimal place). The best choice is C.

Agnes Company Reported the Following Data