A company has an average inventory on hand of $40,000 and its average days in inventory are 26.4 days. What is the cost of goods sold?
A) $553,030.
B) $1,056,000.
C) $486,667.
D) $480,000.

Question

Quizplus · Accepted Answer

The cost of goods sold is calculated by multiplying the average inventory on hand by the inventory turnover ratio. The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory on hand. In this case, the cost of goods sold is not given, so we cannot calculate the inventory turnover ratio. However, we can use the average days in inventory to calculate the inventory turnover ratio. The inventory turnover ratio is calculated by dividing 365 days by the average days in inventory. In this case, the inventory turnover ratio is 365 days / 26.4 days = 13.82. The cost of goods sold is calculated by multiplying the average inventory on hand by the inventory turnover ratio. In this case, the cost of goods sold is $40,000 * 13.82 = $553,030.

A Company Has an Average Inventory on Hand of $40,000