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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

Summit Supply is an electrical parts wholesaler. Last year its average inventory at cost was $132,500 and its cost of goods sold was $690,400. The inventory turnover rate published for a business of this size is 5.5 times.

a. Calculate the actual inventory turnover rate at cost for Summit Supply. Round to the nearest tenth.

b. If the turnover rate is below the industry average of 5.5 times, calculate the target average inventory needed to match the industry standard.

(a)

To determine

To calculate: The inventory turnover at cost for summit supply whose average inventory at cost for the last year is provided as $132,500 and its cost of goods sold is $6940,400 and the inventory turnover rate published is 5.5 times.

Explanation

Given Information:

The average inventory is provided as $132,500.

The cost of goods sold is provided as $6,940,400.

The published turnover rate is provided as 5.5 times.

Formula used:

Inventory turnover is:

inventory turnover= cost of total sales of goods average inventory at cost

Calculation:

Consider average inventory and net sales provided as $132,500 and $6,940,400 respectively

(b)

To determine

To calculate: The target average inventory to match the industry for summit supply whose average inventory at cost for the last year is provided as $132,500 and its cost of goods sold is $6940,400 and the inventory turnover rate published is 5.5 times.

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