Answered: Explain the two methods of inventory…

Explain the two methods of inventory tracking: inventory turnover ratio and number of days' sales in inventory ratio. Give some examples of businesses where they are best applicable.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 16EB: Compute Westtown Companys (A) inventory turnover ratio and (B) number of days sales in inventory...

See similar textbooks

Related questions

Q: How is Day Sales in Inventory calculated?

A: Inventory turnover ratio: This is a financial measure that is used to evaluate as to how many times…

Q: complete the following table which compares the effects of LIFO, FIFO and weighted-average…

A: Inventory valuation in costing is done using mainly three methods namely FIFO, LIFO and weighted…

Q: When using a perpetual inventory system and the weighted-average inventory costing method, when does…

A: Perpetual inventory system: The method or system of maintaining, recording, and adjusting the…

Q: The company uses the specific identification cost method for inventory valuation. Calculate the cost…

A: Purchases Sales Balance Date Quantity Unit Cost Value Quantity Unit Cost Value Quantity Unit…

Q: Explain the calculation procedures for and significance of each of the following: a. Return on…

A: a. Return on sales: It is a financial ratio that state how efficiently an organization is earning…

Q: The following table shows some selected financial information of Quartz Company. According to the…

A: Inventory Turnover: = COGS / (Average inventory) Where; COGS = Cost of goods sold Average inventory:…

Q: The inventory valuation method that has the advantages of assigning an amount to inventory on the…

A: Inventory means the stock of goods in hand . Goods means the thing in which the business deals and…

Q: Hugo Ltd., follows the LIFO system. From the particulars given below, ascertain the cost of sales…

A: Last-in, first-out method: Under the last-in-first-out method goods that are brought at later dates…

Q: Explanation consideration for business while d a inventory system from lifo fifo and weighted…

A: LIFO (Last in first out) LIFO is used to place an accounting value of inventories. It is based on…

Q: Assuming that all net sales figures are at retail and all cost of goods sold figures are at cost,…

A: Inventories refer to the stock of goods that is held for the ultimate purpose of resale.

Q: How can we prepare financial statements for a company using periodic inventory system?

A: To calculate or account inventory there is two method, perpetual and periodic inventory method. In…

Q: Assuming that all net sales figures are at retail and all cost of goods sold figures are at cost,…

A: A ratio that provides information regarding the number of times a company sold or replaced its…

Q: Assuming that the price the company pays for inventory is increasing, which method will:

A: The appropriate answer is shown below

Q: Assuming that all net sales figures are at retail and all cost of goods sold figures are at cost,…

A: The question is based on the concept of Cost Accounting.

Q: Based on the following data for the current year, what is the inventory turno-

A: Answer: Option d

Q: If ABC uses the average retail method, how much would the estimated ending inventory be?

A: Retail Inventory method is used to verify the Ending Inventory Value. There are 2 methods: Average…

Q: When preparing interim financial statements, what two methods can companies utilize to estimate cost…

Q: This information (in millions) is available for the Automotive and Other Operations Divisions of…

Q: Define days' sales in inventory (what do the results mean). Provide an example

A: Days sales in inventory means how much days company will take to convert its inventory into sales.…

Q: Why do companies that use perpetual inventory systems alsotake an annual physical inventory? When is…

A: Perpetual inventory system The perpetual inventory system can be defined as the inventory system…

Q: a. Based on Table 1, compute the company's supply chain performance in terms of inventory turnover…

A: The answer is stated below:

Q: Explain an example how to calculate inventory turnover ratio.

A: Inventory turnover ratio : Inventory turnover is used to find how many times a company sold its…

Q: Please Calculate and interpret the following ratios Activity: Inventory Turnover , Receivables…

A: Ratio analysis refer to the evaluation of financial ration in order to get idea about profitability,…

Q: What is Return on Assets? How do you calculate Inventory Turnover and The Number of Days' Sales in…

A: P

Q: Assuming that all net sales figures are at retail and all cost of goods sold figures are at cost,…

A: Average inventory = (beginning inventory+ending inventory)/2 Inventory turnover = net sales/Average…

Q: Inventory Turnover Ratio shows the speed at which the inventory will be converted into sales. Select…

A: Introduction: Inventory turnover ratio is one of the financial ratios which is computed by any…

Q: Which of the following is used to analyze the efficiency and effectiveness of inventory management?…

A: Formulas: Inventory turnover ratio = Cost of goods sold / Average inventory Days' sales in…

Q: What is the cost of inventory of Z Company on December 31? What amount of cost of goods sold…

A: In weighted average method of inventory valuation, the price of the inventory is based on…

Q: When a company organizes its inventory based on its relative importance, it is using Select one: O…

A: ABC analysis is a technique for material management. It is categorization of items into 3 categories…

Q: Accountants at UltraTech obtain their values for inventory and total assets, calculate the balance…

A: Inventory to assets ratio is a financial ratio used for the analysis of financials of the company.…

Q: What should be the journal entry to match the inventory record to the physical count of inventory?…

A: Inventory is the goods which the company has which are in order to sell them. In simple terms, these…

Q: calculate the average inventory (in $) and inventory turnover for the following. If the actual…

A: Cost of Goods Sold: It is the cost of producing the goods which are sold by the business. Average…

Q: Explain the term inventory turnover ratio.

A: Definition: Ratio analysis: One of the techniques of financial statement analysis is ratio…

Q: Calculate the Inventory Turnover and Day Sales in Inventory ratios for Hayden Co. assuming the FIFO…

A: Inventory turnover ratio is calculated as cost of goods sold divided by average inventory.

Question

Explain the two methods of inventory tracking: inventory turnover ratio and number of days' sales in inventory ratio. Give some examples of businesses where they are best applicable.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

What insights can be gained from inventory ratio analysis, such as inventory turnover ratio and number of days sales in inventory ratio?
Compute Westtown Companys (A) inventory turnover ratio and (B) number of days sales in inventory ratio, using the following information.
Use the first-in, first-out (FIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions.
Use the weighted-average (AVG) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for B75 Company, considering the following transactions.
Use the last-in, first-out (LIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions.
Use the first-in, first-out method (FIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for B75 Company, considering the following transactions.
Use the last-in, first-out method (LIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for B75 Company, considering the following transactions.
DETERMINING THE BEGINNING AND ENDING INVENTORY FROM A PARTIAL SPREADSHEET: PERIODIC INVENTORY SYSTEM From the following partial spreadsheet, indicate the dollar amount of beginning and ending merchandise inventory to be used to compute cost of goods sold.
Which of the following indicates a positive trend for inventory management? A. increasing number of days sales in inventory ratio B. increasing inventory turnover ratio C. increasing cost of goods sold D. increasing sales revenue
Assume that the business in Exercise 6-9 maintains a perpetual inventory system. Determine the cost of goods sold for each sale and the inventory balance after each sale, assuming the first-in, first-out method. Present the data in the form illustrated in Exhibit 3.
Using the perpetual inventory system, what account is debited when a business finds that its physical count of inventory is greater than the recorded amount?
The following information is taken from a companys records. Applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?