Question

3M Co. reports beginning raw materials inventory of $855 million and ending raw materials inventory of 717 million. Assume 3M purchased 3646 million of raw materials and used 3784 million of raw materials during the year. Compute raw materials inventory turnover and the number of days slaes in raw materials inventory

Answer 1

Answer:

4.8 times

76 days

Explanation:

Inventory Turnover is the numbers of times that an inventory is sold in a period. It shows that is there any excessive inventory available in respect to the current sales level.

Formula for Inventory Turnover

Inventory Turnover = Inventory Used during the year / Average Inventory

Inventory Turnover = 3,784 million / ( ( $855 + $717 ) / 2 )

Inventory Turnover = 3,784 million / $786

Inventory Turnover = 4.8 times

Number of days Sales is the numbers of days that a company takes to to be sold.

Numbers of Days Sales = 365 / Inventory Turnover ratio

Numbers of Days Sales = 365 / 4.8 = 76.04 = 76 days