Wednesday, December 19, 2012

Important calculation

Inventory t/o

Balance Sheet Line ItemAmount
Cost of goods sold$4,075,000
Direct materials expense$1,550,000
Raw materials inventory$388,000
Total inventory$815,000

To calculate total inventory turnover, the accounting staff creates the following calculation:

$4,075,000 Cost of Goods Sold
--------------------------------------   =   5 Turns Per Year
$815,000 Inventory

To determine the number of days of inventory on hand, they divide the number of turns per year into 365 days, as follows:

Cost of Goods Sold
365 /    -----------------------


$4,075,000 Cost of Goods
365 / ---------------------------------
$815,000 Inventory

= 73 Days of inventory

CCC=# days between disbursing cash and collecting cash in connection with undertaking a discrete unit of operations.
=Inventory conversion period  +Receivables conversion period  –Payables conversion period
=Avg. Inventory

COGS / 365
  +Avg. Accounts Receivable

Credit Sales / 365
  –Avg. Accounts Payable

Purchases / 365


1 comment:

  1. Do you need to increase your credit score?
    Do you intend to upgrade your school grade?
    Do you want to hack your cheating spouse Email, whatsapp, Facebook, instagram or any social network?
    Do you need any information concerning any database.
    Do you need to retrieve deleted files?
    Do you need to clear your criminal records or DMV?
    Do you want to remove any site or link from any blog?
    you should contact this hacker, he is reliable and good at the hack jobs..
    contact : cybergoldenhacker at gmail dot com