Homework SourseExercise 649 Algorithmic Analyzing Inventory Examining the r
Exercise 6-49 (Algorithmic)
Analyzing Inventory
Examining the recent financial statements of McLelland Clothing, Inc., you note the following:
Required:
Calculate McLelland\'s gross profit ratio, inventory turnover ratio, and assuming a 365-day year, the average days to sell inventory. (Use two decimal places for gross profit ratio and average days to sell inventory, three decimal places for inventory turnover ratio.)
| Sales | $754,693 |
| Cost of goods sold | 506,700 |
| Average inventory | 76,900 |
Solution
The correct answer is :
Note:
Gross profit = Sales - Cost of goods sold
= $ 754,693 - $ 506,700
= $ 247,993
Gross Profit Ratio =Gross profit / Sales *100
= $ 247,993 / $ 754,693 *100
= 32.86%
Inventory turnover ratio = Cost of goods sold / Average inventory
= 506,700 / 76,900
= 6.589076723
= 6.589
Average days to sell inventory = 365 Days /Inventory turnover ratio
= 365 / 6.589076723
= 55.39471087
= 55.39 days
| Gross profit ratio | 32.86 % |
| Inventory turnover ratio | 6.589 |
| Average days to sell inventory | 55.39 days |
