To calculate days in inventory, which of the following is the formula used?

The formula for calculating days in inventory is designed to determine how long it takes, on average, for a company to sell its entire inventory during a specific period. To arrive at this figure, the correct formula divides the average inventory by the daily cost of goods sold (COGS).

Daily COGS is calculated by taking the total COGS for the year and dividing it by the number of days in the year, typically assuming 365 days. This gives you a consistent measure of how much inventory is sold on a daily basis. By structuring the formula as average inventory divided by daily COGS, it effectively provides the average number of days that inventory remains before it gets sold.

In contrast, the other options do not correctly represent this concept. For instance, the option that presents average inventory divided by COGS alone fails to account for the time metric, making it impossible to derive the number of days. Thus, the selected option properly captures the relationship needed to understand inventory turnover and lays out the calculation in a manner that reflects the time dimension associated with inventory management.