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Last year, Toby’s Hats had net sales of $45,000,000 and cost of goods sold of $29,000,000. Toby’s had the following balances: Refer to the information for Toby’s on the previous page. Required: Note: Round answers to one decimal place. 1. Calculate the average inventory. 2. Calculate the inventory turnover ratio. 3. Calculate the inventory turnover in days. 4. CONCEPTUAL CONNECTION Based on these ratios, does Toby’s appear to be performing well or poorly?

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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
Chapter 15, Problem 28BEB
Textbook Problem
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Last year, Toby’s Hats had net sales of $45,000,000 and cost of goods sold of $29,000,000. Toby’s had the following balances:

Chapter 15, Problem 28BEB, Last year, Tobys Hats had net sales of 45,000,000 and cost of goods sold of 29,000,000. Tobys had

Refer to the information for Toby’s on the previous page.

Required:

Note: Round answers to one decimal place.

  1. 1. Calculate the average inventory.
  2. 2. Calculate the inventory turnover ratio.
  3. 3. Calculate the inventory turnover in days.
  4. 4. CONCEPTUAL CONNECTION Based on these ratios, does Toby’s appear to be performing well or poorly?

1.

To determine

Compute the value of average inventory.

Explanation of Solution

Inventory Turnover Ratio:

Inventory turnover ratio is a measure of liquidity, which evaluates how quickly inventory is sold during the particular year.

Use the following formula to calculate the value of average inventory:

Average Inventory=Beginning Inventory+Ending Inventory2

Substitute $3,000,000 for beginning receivable and $2,800,000 for ending receivable in the above formula

2.

To determine

Compute the value of inventory turnover ratio.

3.

To determine

Compute the value of inventory turnover in days.

4.

To determine

Identify whether the Company TO is performing well.

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