Question

When there is a high inventory turnover, there is an increase in sales because: a) more money is available to buy new merchandise.b) sales are increased by reducing prices.c) new merchandise is continually available to customers.d) price points are set higher to accommodate for potential sales loss. e) the merchandise begins to look shopworn.

Answer 1

Answer:

The answer is C.

Explanation:

Inventory turnover is a measure of the number of times inventories are sold during a period of time usually a year.

To calculate inventory turnover:

Cost of goods sold ÷ average inventory

High inventory turnover means that the company's product is in high demand and when the product is in high demand, it means there is an increase in sales.

An increase is demand means new inventory or merchandise are continually available and continually bought.

Answer 2

Answer:

c) new merchandise is continually available to customers.

Explanation:

By looking on the following formula

Inventory Turnover = Cost of Goods Sold / Average Inventory

That the inventory turnover can only be increase if there in high cost of goods sold or lower average inventory.

At the same time the higher cost of goods sold and low average inventory results high inventory turnover. as the cost of goods sold vary with the sales, so increase in COGS means increase in sales too. inventory is cost of goods sold is inversely proportion to the inventory level. as cost of goods sold increase the level of inventory decrease and vice versa.

So, high turnover means customers have readily available new merchandise because the inventory level is low.