The following is information for Palmer Co.: 2017 2016 2015
Cost of goods sold $643,825 $426,650 $391,300
Ending inventory 97,400 87,750 92,500
Required:
(a) Use the above information to compute inventory turnover for 2016, and its days' sales in inventory at December 31, 2016.
Numerator / Denominator = Ratio
Inventory turnover $426,650 / $90,125 = 4.7 times
Days' sales in inventory ?
(b) Use the above information to compute inventory turnover for 2017, and its days' sales in inventory at December 31, 2017.
Numerator / Denominator = Ratio
Inventory turnover $643,825 / $92,575 = 7.0times
Days' sales in inventory ?

a.

i. 4.7 times

ii. 77.1 days

b

i. 7 times

ii. 52.1 days

Explanation:

Inventory turnover = cost of goods sold / average inventory

average inventory for 2016 = ( 87,750 + 92,500 ) / 2 = $90,125

Inventory turnover $426,650 / $90,125 = 4.7 times

Days' sales in inventory = 365 / inventory turnover = 77.1 days

for 2017

inventory turnover = cost of goods sold / average inventory

average inventory for 2017 = ( 97,400 + 87,750 ) / 2 = $92,575

Inventory turnover $643,825 / $92,575 = 7.0 times

Days' sales in inventory = 365 / inventory turnover = 52.1 days

a.   is the correct choice.

good luck. : )

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.