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newacctstudent
Jul 28, 2013, 04:21 PM
a firm had $100 of average inventory, gross margin of $1,200 and sales of $1,500. Its measure of inventory days on hand (or days in inventory) using a 365 day year is:
A.) 30.4 days
B.) 91.3 days
C.) 121.7 days
D.) Not enough information

So I know the equations I want to use are:
Days in Inventory= Average Inventory/(COGS/365)
Gross Margin=Profit/Sales

I think the answer is D, because I can't figure out what the COGS are without knowing the Profit. And I cannot figure out the days in the inventory without the COGS.

Right? Or an I missing an equation that could give me the COGS from the information given?

ebaines
Jul 28, 2013, 05:28 PM
Gross margin is not profit/sales, but rather (Revenue-COGS)/Revenue. The difference is that GM does not include sales general & administrative expenses, whereas profit includes all expenses and costs. So yes, you do have enough info to answer the question.

newacctstudent
Jul 28, 2013, 05:47 PM
Hi Ebaines.
A little more help? I am not seeing where I would get the revenue from in that equation.

pready
Jul 28, 2013, 11:55 PM
Sales is Revenues.