Question

A manufacturing company producing medical devices reported $59 million in sales over the last year. At the end of the same year, the company had $16 million worth of inventory of ready-to-ship devices. (Round your answer to 1 decimal place.) Assuming that units in inventory are valued (based on cost of goods sold) at $500 per unit and are sold for $1750 per unit, what is the company's annual inventory tumover

Answer 1

Answer:

The inventory TO is 3.6875

Explanation:

$\frac{Sales}{Average Inventory} = Inventory Turnover$

​where:

$Average Inventory=(Beginning Inventory + Ending Inventory)/2$

Considering there is not sufficient information to calculate the begining inventory we are going to work only with the ending inventory so:

$\frac{59,000,000}{16,000,000} = 3.6875$

The inventory TO is 3.6875 This means the company sales their inventory almost 4 times per year.