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    newacctstudent's Avatar
    newacctstudent Posts: 4, Reputation: 1
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    #1

    Jul 28, 2013, 04:21 PM
    inventory days question
    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's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #2

    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's Avatar
    newacctstudent Posts: 4, Reputation: 1
    New Member
    		  
    #3

    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's Avatar
    pready Posts: 3,197, Reputation: 207
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    #4

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