Derive the stock turnover period.(Average stock = 23,000. Cost of sales = 300,000 year = 365 days).
Question 1 Report
Derive the stock turnover period.(Average stock = 23,000. Cost of sales = 300,000 year = 365 days).
Answer Details
The stock turnover period measures the average number of days it takes a company to sell its entire inventory or stock. It is calculated by dividing the average stock by the cost of sales per day.
To find the stock turnover period, we first need to calculate the cost of sales per day, which is simply the total cost of sales divided by the number of days in the year:
Cost of sales per day = Cost of sales / Number of days = 300,000 / 365 = 821.92
Next, we divide the average stock by the cost of sales per day:
Stock turnover period = Average stock / Cost of sales per day = 23,000 / 821.92 = 28.01 days (rounded to the nearest whole number)
Therefore, the stock turnover period is approximately 28 days. This means that, on average, it takes the company 28 days to sell its entire inventory or stock.
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