The owners of Junglefy, a houseplant nursery, want to calculate their DIO for 2022. Their beginning inventory balance was $21,490, and their ending balance was $11,850. That brings their average inventory to $16,670.
$16,670 Average inventory = ( $21,490 Beginning inventory + $11,850 Ending inventory) / 2
The cost of goods sold is $137,780 and the number of days in the accounting period is 365. We can plug these figures into the days inventory outstanding formula to get a DIO of
33.56 DIO = ($16,670 Average inventory / $137,780 COGS) * 365
Overall, Junglefy has a fairly healthy DIO. Of course, it never hurts to improve.