Computing the average inventory days outstanding

Reference no: EM13827682

Problem:

In the 2011 financial statements of Hocking River Vineyards reports that Inventories consist of the following:

	2011	2010
Winemaking and packaging materials	$248,350	$296,012
Work-in-process	3,535,028	3,209,692
Finished goods	5,889,816	7,226,730
Obsolescence reserve	(54,049)	(20,416)
Total inventories	$9,619,145	$10,712,018

The company reported cost of goods sold of $7,944,635 in 2011 and $9,679,414 in 2010.

1. Compute average inventory days outstanding for both years and interpret any change. What does this ratio mean?

2. Is the year-over-year change good news? Why?

Summary of problem:

This question is from Finance and it is about computing the average inventory days outstanding for two years and interpreting any changes as well as discusses about the year-over-year change being good news or not.

Reference no: EM13827682

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