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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

Assuming that all net sales figures are at retail and all cost of goods sold figures are at cost, calculate the average inventory and inventory turnover for the following. If the actual turnover is less than the published rate, calculate the target average inventory necessary to come up to industry standards. Round inventories to the nearest dollar and inventory turnovers to the nearest tenth.

Cost of Beginning Ending Average Inventory Published Target Average
Net Sales Goods Sold Inventory Inventory Inventory Turnover Rate Inventory
8. $884,500 $224,130 $134,900 _______ _______ 5.9 _______

To determine

To calculate: The target average inventory when the inventory turnover is less than published rate, average inventory and inventory turnover and round off to nearest tenth when the total cost of goods sold is $884,500 and beginning and ending inventory are $224,130 and $134,900 respectively and the published rate is 5.9 times.

Explanation

Given Information:

The beginning and the ending inventory is provided as $224,130 and $134,900 respectively.

The total cost of goods sold is provided as $884,500.

The published rate is provided as 5.9.

Formula used:

The average inventory at retail is:

average inventory at retail= begining inventory at retail+ending inventory at retail2

The inventory turnover at retail is:

inventory turnover at retail= net sales at retailaverage inventory at retail

The target average inventory turnover at retail is:

target average inventory at retail= net salespublished inventory turnover at retail

Calculation:

Consider the beginning and ending inventory are provided as $224,130 and $134,900 respectively.

And now calculate the average inventory using the formula,

average inventory at cost= begining inventory at cost+ending inventory at cost2.

Now,

average inventory at cost= 224130+1349002=3590302=179515

Therefore, the average inventory is $179,515

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