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A company has an average inventory balance (over a year) of $30,000. The company's annual cost of sales are $360,000. Days inventory on hand is
A company has an average inventory balance (over a year) of $30,000. The company's annual cost of sales are $360,000. Days inventory on hand is a metric that measures how much, on average and stated in days of use, inventory a business needs to keep on hand to meet demand given its particular production technique. What is the company's average days inventory on hand (DIOH) Select one: O a. Since on average, $30,000 of inventory is on-hand, and we use up (Cost of Sales) $360,000 of inventory in one year, this means that 1/12 (30/360) of annual inventory remains, on average, in the warehouse. Since 1/12 of a year is one month, it must be the case that DIOH is 30 days. So on average we need to keep 30 days of inventory on-hand in order to service our customers given our particular production technique/technology (our process). O b. Since 30/360 = 1/12, DIOH= 1/12. O C. Since 360/30 = 12, DIOH= 12. O d. None of the above. A company has an average accounts receivable balance over a year) of $30,000 The company's annual sales are $360,000. Days sales outstanding is a metric that measures how long, on average, it takes a business to collect upon a sale. What is the company's average days sales outstanding (DSO)? For reference, the sale/collection cycle for a business that extends credit to its customers looks like this: Initial sale: Accounts Receivable 100 Revenue 100 Collection: Cash Accounts Rec 100 100 Select one: O a. Since on average, $30,000 of sales are uncollected, and there are $360,000 of sales in year, this means that 1/12 (30/360) of annual sales remain, on average, uncollected and outstanding. Since 1/12 of a year is one month, it must be the case that DSO is 30 days. O b. Since 30/360 = 1/12, DSO = 1/12 O c. Since 360/30 = 12, DSO = 12. O d. None of the above
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