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.