The Calculation of Average Age of Inventory

The average age of inventory can be calculated in a specific way. It is determined by dividing the number of days in the period by the inventory turnover.

Calculation Method

Average age of inventory can be calculated as inventory divided by 365.

True or False

O True

O False

Final Answer

The claim is incorrect. Generally, average inventory age is determined by dividing the number of days in the period by the inventory turnover, not by dividing the inventory by 365 days.

Explanation

The statement is false. The average age of inventory is usually calculated using the formula: days in the period divided by inventory turnover, not inventory divided by 365. The inventory turnover is a measure of how often the inventory is sold and replaced during a specific period of time, so it plays an important role in the calculation.

Is it true that the average age of inventory is calculated by dividing the inventory by 365?

No, the average age of inventory is not calculated by dividing the inventory by 365. It is determined by dividing the number of days in the period by the inventory turnover.