Chapter 13, Problem 13.12BE

(a)

To determine

Inventory turnover ratio: Inventory turnover ratio is used to determine the number of times inventory used or sold during the particular accounting period.

Formula:

$\text{Inventory turnover}=\frac{\text{Cost of goods sold}}{\text{Average inventory}}$

Days’ sales in inventory: Days’ sales in inventory are used to determine number of days a particular company takes to make sales of the inventory available with them.

Formula:

$\text{Days' sales in inventory}=\frac{\text{Days in accounting period }\left(365\text{days}\right)}{\text{Inventory turnover}}$

To compute: Inventory turnover ratio for 2017

(b)

To determine

To calculate:  The days in inventory for the year 2017 and 2016.