Question

A manufacturing company producing medical devices reported $60 million in sales over the last year. At the end of the same year, the company had $20 million worth of inventory of ready-to-ship devices. Assuming that units in inventory are valued (based on cost of goods sold) at $1000 per unit and are sold for $2000 per unit, what is the company’s annual inventory turnover?

Answer 1

Answer:

Annual average inventory in days (no of times) = 1.5 times

Explanation:

Annual inventory turn over is the average length of time it takes for inventor to be sold and replaced.

Average inventory turnover = average inventory/ cost of sold × 365

Average inventory turnover (in No of  times) = Cost of sold sold /average inventory

Cost of goods sold

= (1000/2000) × 60 million

= $30 million

Closing Inventory = $20 million

Annual average inventory

= $20/ 30 × 365 days

= 243.days

Annual average inventory

= cost of sold sold /average inventory

=30/20

= 1.5 times

Annual average inventory in days =  243.days

Annual average inventory in days (no of times) = 1.5 times