Use the information below to answer the following questions:
Saw Ltd’s inventory at 1 July 2011 was $16 300, and at 30 June 2009 it was $23 700. Sales for the year ended 30 June 2012 were $125 000 and the gross margin was 20%.
-What was the number of days' inventory on hand?
A) 73 days
B) 69.5 days
C) it cannot be calculated from the information provided
D) 50 days.

Question

Use the information below to answer the following questions:
Saw Ltd’s inventory at 1 July 2011 was $16 300, and at 30 June 2009 it was $23 700. Sales for the year ended 30 June 2012 were $125 000 and the gross margin was 20%. 
-What was the number of days' inventory on hand?
A) 73 days
B) 69.5 days
C) it cannot be calculated from the information provided
D) 50 days.

Quizplus · Accepted Answer

The number of days' inventory on hand is calculated as follows:Average inventory = (Opening inventory + Closing inventory) / 2= ($16,300 + $23,700) / 2= $20,000Cost of goods sold = Sales / Gross margin= $125,000 / 20%= $100,000Number of days' inventory on hand = (Average inventory / Cost of goods sold) * 365 days= ($20,000 / $100,000) * 365 days= 73 days

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