smith company presents the following data for 2012. inventories, beginning of year $ 310,150 inventories, end of year 340,469 cost of goods sold 2,103,696 net sales 8,690,150 the number of days' sales in inventory is:

Days in inventory are calculated by dividing average inventory over a given time by the cost of goods sold (COGS) during that period and multiplying the result by the number of days in the period.

Formula

Days' sales in Inventory = 365 ÷ Inventory turnover

Cost of Goods Sold COGS = $2103696

Inventory in the end (Current) = $340469

Inventory ]in the beginning (Previous) = $310150

First, we need to find out the inventory turnover, by using the following formula

Inventory Turnover = Cost of Goods Sold ÷ Average Inventory

= 2103696 ÷ (3404696 + 310150)/2

= 2103696 ÷ 325309.5

= 6.47

Now, that we have the inventory turnover, the days' sales in inventory are found out by the following formula

Days' sales in Inventory = 365 ÷ Inventory turnover

= 365 ÷ 6.47

= 56.44

Therefore, the days' sales in inventory are 56.44 for the given cost of goods sold of COGS = $ 2103696, Inventory in the end of $340469 and in the beginning of $310150. This means that the firm's inventory sits an average of 56.44 days , before it is sold.

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