Question

Imagine that you are the supply chain manager for the Magic Widget company and you need to measure your supply chain performance. The chart shows the financial variables that you will need to perform your task.
Financial Variables
Total Assets (in $ billions) 15.1
Cost of Goods Sold (in $ billions) 14.3
Inventory:
Raw Material Inventory (in $ billions) 0.76
Work-in-progress Inventory (in $ billions) 0.12
Finished Goods Inventory (in $ billions) 0.82

Compute the percentage of assets committed to inventory and inventory turnover.

Answer 1

Answer:

Percentage of assets in inventory = 11.26%

Inventory turnover = 8.41 times

Explanation:

The computation of the percentage of assets committed to inventory and inventory turnover is shown below:-

Total inventory = Raw material + Work in progress + Finished goods inventory

= $0.76 billion + $0.12 billion + $0.82 billion

= $1.7 billion

Percentage of assets in inventory = Total inventory ÷ Total assets

= $1.7 ÷ $15.1

= 11.26%

Inventory turnover = Cost of goods sold ÷ Total inventory

= $14.3 ÷ $1.7

= 8.41 times