Question

If at the end of the year, the cost of revenue = $2,500, total revenue = $12,000 and inventory value = $2,000, the inventory turnover ratio would be:

0.208

0.375

2.667

0.800

1.250

b)

Classify the following inventory items as either A, B, or C items using the ABC inventory control system:

Item #	Annual Sales	Unit Cost
1	130 units	$ 4.00
2	400 units	15.30
3	25 units	17.00
4	1320 units	1.25
5	90 units	2.10

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item 1 (C), item 2 (A), item 3 (C), item 4 (B), item 5 (C)

item 1 (B), item 2 (A), item 3 (A), item 4 (C), item 5 (C)

item 1 (C), item 2 (B), item 3 (C), item 4 (A), item 5 (C)

item 1 (A), item 2 (B), item 3 (C), item 4 (A), item 5 (B)

item 1 (B), item 2 (C), item 3 (B), item 4 (C), item 5 (A)

c)

The cost of a product is $5, and the carrying cost rate is 20%; the cost of processing an order is $45 and the annual demand is 1000. What is the economic order quantity (EOQ)?

5

20

25

200

300

Answer 1

a)	Inventory turnover ratio		=	Cost of revenue	/	Inventory
			=	$       2,500	/	$       2,000
			=	1.250
c)	Economic order quantity		=	(2AO/C)^(1/2)		Where,
			=	((2*1000*45)/1)^(1/2)		A	Annual demand	=	1000
			=	300		O	Ordering cost per order	=	$    45.00
						C	Carrying cost per unit	=	5*20%	=	$       1.00