Question

# Unit sales 100,000 Total sales \$2,000,000 Cost of Goods Sold \$500,000 Average inventory in units...

1.
 Unit sales 100,000 Total sales \$2,000,000 Cost of Goods Sold \$500,000 Average inventory in units 10,000 Average inventory at retail \$600,000 Average inventory at cost \$100,000
1. What is inventory turnover at retail?
1. What is inventory turnover at cost?
1. What is inventory turnover using unit sales?
1. Discussion: Why are the results from a, b, and c different?

Inventory turnover at retail = Total sales / Average inventory at retail

= 2000000 / 600000

= 3.33

Inventory turnover at cost = cost of goods sold / average inventory at cost

= 500000 / 100000

= 5

Inventory turnover using unit sales = Total unit sales / average inventory in units

= 100000 /10000

= 10

The three parameters give three different results.

Inventory turnover at retail gives us the rate at which company purchases and ressels the products.

inventory turnover at cost estimates the rate at which the company produces and sells the products

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