Average inventory holding period

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Spanz85
Spanz85 Registered Posts: 13
in Management Accounting: Decisions and Control
Help!

My exam is tomorrow.

I was taught that to work our average inventory holding period you:

Closing inventory / COS *365

And to work out payables period you:

Payables/COS * 365

However these calculations do not give the correct answers in AAT mock exam 1 Q1.7

So how do you do it?

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  • Clintm15
    Clintm15 Registered Posts: 248 Dedicated contributor 🦉
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    It's because to obtain the average inventory you need an average inventory calculation.

    Try,

    Opening inventory + closing inventory / 2.

    Then use this figure instead of closing inventory and see if it works.
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