Question

The owner of a large machine shop has just finished its financial analysis from the prior fiscal year. Following is an excerpt from the final report: Net revenue $ 375,000 Cost of goods sold 322,000 Value of production materials on hand 42,500 Value of work-in-process inventory 37,000 Value of finished goods on hand 12,500 a. Compute the inventory turnover ratio (ITR). (Round your answer to 1 decimal place.) Inventory turnover ratio per year b. Compute the weeks of supply (WS). (Do not round intermediate calculations. Round your answer to 1 decimal place.) Weeks of supply

Answer 1

Answer:

The firm turnover: is 8.1

while the weeks of supply are 6.19

Explanation:

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

​where:

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

37,000 + 42,500 = 79,500 / 2 = 39,750

Inventory TO 322,000 / 39,750 = 8,100

cost of good sold: 322,000 / 52 = 6,192 inventory sold per week

inventory at hand 42,500

42,500 / 6,192 = 6,86