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gThe following data are available for Martin Solutions, Inc. Year 2 Year 1 Sales $1,139,600 $1,192,320 Beginning inventory 80,000 64,000 Cost of goods sold 500,800 606,000 Ending inventory 72,000 80,000 Required: Assume a 365-day year. Determine for each year:

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Answer and Explanation:

The computation is shown below;

For Year 1

Average inventory = (Beginning inventory + Ending inventory)รท 2

= ($64,000 + $80,000) รท 2

= $72,000

Inventory turnover = Cost of goods sold ย รท Average inventory

= $606,000 รท 72,000

= 8.4 times

Days in inventory = 365 รท Inventory turnover ratio

= 365 รท 8.4

= 43.5 days

For Year 2

Average inventory = (Beginning inventory + Ending inventory) รท 2

= ($80,000 + $72,000) รท 2

= $76,000

Inventory turnover = Cost of goods sold รท Average inventory

= $500,800 รท 76,000

= 6.6 times

Days in inventory = 365 รท Inventory turnover ratio

= 365 รท 6.6

= 55.3 days

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