Question

(Inventory Cost) A manufacturing company producing medical devices reported
$60, 000, 000 in sales over the last year. At the end of the same year the company had
$ 20, 000, 000 worth of inventory of ready-to-ship devices.
a) Assuming that units in inventory are valued (based on COGS) at $1,000 per unit and
are sold for $2,000 per unit, how fast does the company turn its inventory? The
company uses a 25% per year cost of inventory. That is for the hypothetical case that
one unit of $1,000 would sit exactly one year in inventory, the company charges its
operations division a $250 inventory cost.
b) What in absolute terms is the per unit inventory cost for a product that costs $1,000?

Answer 1