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The following information is available for Zoe’s Activewear Inc. for three recent fiscal years. 2017 2016 2015 Inventory $553,000 $568,000 $332,000 Net sales 1,948,000 1,725,000 1,311,000 Cost of goods sold 1,552,000 1,288,000 947,000 Calculate the inventory turnover, days in inventory, and gross profit rate for 2017 and 2016. (Round inventory turnover to 1 decimal place, e.g. 5.1, days in inventory to 0 decimal places, e.g. 125 and gross profit rate to 1 decimal place, e.g. 5.1%.)
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Question & Answer: The following information is available for Zoe’s Activewear Inc. for three recent fiscal y…..
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| 2017 | 2016 | |
| Average inventory(Beginning balance+Ending balance)/2 | (553000+568000)/2=$560500 | (568000+332000)/2=$450,000 |
| Inventory turnover=(COGS/Average inventory) | (1,552,000/560500)=2.8 | (1,288,000/450,000)=2.9 |
| Days in inventory(365/inventory turnover) | (365/2.8)=132 days | (365/2.9)=128 days |
| Gross profit rate(Sales-COGS)/Sales | (1948000-1552000)/1948000=20.3% | (1725000-1288000)/1725000
=25.3% |
NOTE:
It has been assumed that there are 365 days in a year.
Intermediate calculations have not been rounded off.
