A. The average number of days to sell inventory is calculated as 365 divided by the inventory turnover ratio. Inventory turnover is calculated as the cost of goods sold divided by average inventory (the average of the beginning and ending balances). This answer uses only ending inventory in the calculation of inventory turnover.
B. The average number of days to sell inventory is calculated as 365 divided by the inventory turnover ratio. Inventory turnover is calculated as the cost of goods sold divided by average inventory. This answer uses only beginning inventory in the calculation of inventory turnover.
C. The average number of days to sell inventory is calculated as 365 divided by the inventory turnover ratio. Inventory turnover is calculated as the cost of goods sold divided by average inventory. This answer uses sales instead of the cost of goods sold to calculate the inventory turnover.
D. The average number of days to sell inventory is calculated as 365 divided by the inventory turnover ratio. Inventory turnover is calculated as the cost of goods sold divided by average inventory. Cost of goods sold was $4,380,000 and average inventory was $870,000 (the average of the beginning and ending balances). This gives an inventory turnover of 5.03. Dividing 365 by 5.03 gives us 72.5 days as the average number of days to sell inventory.
