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Answer: 49.
To calculate **Days of Inventory on Hand (DOH)**, we use: $$ \text{DOH} = \frac{\text{Average Inventory}}{\text{Cost of Sales}} \times 365 $$ ### Step 1: Determine the correct inventory values The question states that **changes to the allowance for inventory obsolescence have already been reflected in cost of sales**. This means any inventory write-down has **already reduced cost of sales**, and therefore **inventory should be used at its cost amounts**, not re-adjusted to NRV. - Year 2 ending inventory (cost): **€150** - Year 1 ending inventory (cost): **€120** ### Step 2: Calculate average inventory $$ \frac{150 + 120}{2} = 135 $$ ### Step 3: Calculate DOH $$ \frac{135}{1{,}000} \times 365 = 49.3 \approx 49 $$ --- ## ✅ Correct Answer: **B (49)** ### Why others are incorrect - **A (45)**: Incorrectly applies LCNRV again, double-counting the write-down - **C (52)**: Overstates inventory relative to cost of sales --- ### CFA Exam Tip If write-downs are **already included in cost of sales**, **use inventory at cost** when calculating turnover ratios.
Author: LeetQuiz .
An analyst gathers the following information (in € thousands) about an electronics manufacturing company:
| Year 2 | Year 1 | |
|---|---|---|
| Cost of sales | 1,000 | 800 |
| Cost of ending inventory | 150 | 120 |
| Net realizable value of inventory | 125 | 160 |
Changes to the allowance for inventory obsolescence have already been reflected in cost of sales. The days of inventory on hand (based on average inventory and 365-day year) for Year 2 is closest to:
A
B
C
