What calculation expresses Days on Hand (DOH)?

What calculation expresses Days on Hand (DOH)?

• A. = COGS/Average Inventory
• B. = 365/ITOR
• C. DOH = ITOR/365
• D. DOH = COGS/Days of Supply

Answer: (B)

Days on Hand tells you how many days current inventory would last given the sales rate. This concept is tightly tied to how often you turn over inventory in a year, known as the Inventory Turnover Ratio (ITOR). ITOR is calculated as Cost of Goods Sold divided by average inventory. Since a year has 365 days, the days of inventory on hand come from dividing those days by how many times you turn over the stock: DOH = 365 / ITOR. For example, if ITOR is 8 times per year, DOH = 365 / 8 ≈ 45.6 days. This aligns with the idea that a higher turnover means your stock lasts fewer days. The other expressions aren’t correct for DOH: COGS divided by average inventory gives ITOR, not DOH; ITOR divided by 365 incorrectly reverses the relationship; and COGS divided by Days of Supply doesn’t reflect the standard turnover-to-days link.

Days on Hand tells you how many days current inventory would last given the sales rate. This concept is tightly tied to how often you turn over inventory in a year, known as the Inventory Turnover Ratio (ITOR). ITOR is calculated as Cost of Goods Sold divided by average inventory. Since a year has 365 days, the days of inventory on hand come from dividing those days by how many times you turn over the stock: DOH = 365 / ITOR.

For example, if ITOR is 8 times per year, DOH = 365 / 8 ≈ 45.6 days. This aligns with the idea that a higher turnover means your stock lasts fewer days.

The other expressions aren’t correct for DOH: COGS divided by average inventory gives ITOR, not DOH; ITOR divided by 365 incorrectly reverses the relationship; and COGS divided by Days of Supply doesn’t reflect the standard turnover-to-days link.