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?
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Homework Answers

Answer #1

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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