A company that produces specialized video equipment had cost of goods sold last year of $127,000,000.The average value of inventory for raw materials,work-in-process,and finished goods are shown in the table below: If the company operates 50 weeks per year,then the number of inventory turns would be

Question

A company that produces specialized video equipment had cost of goods sold last year of $127,000,000.The average value of inventory for raw materials,work-in-process,and finished goods are shown in the table below:  If the company operates 50 weeks per year,then the number of inventory turns would be

Quizplus · Accepted Answer

Inventory turnover = Cost of goods sold / Average inventory value

Average inventory value = (Beginning inventory value + Ending inventory value) / 2

From the table, the average inventory value is:

(10,000,000 + 15,000,000 + 20,000,000) / 3 = 15,000,000

Using the formula for inventory turnover:

Inventory turnover = 127,000,000 / 15,000,000 = 8.47

Since the company operates for 50 weeks per year, the number of inventory turns would be:

8.47 / 50 = 0.169

Rounding to one decimal place, the answer is 0.2 or 10.2 turns. Therefore, the best answer is D, "10.2 turns."

A Company That Produces Specialized Video Equipment Had Cost of Goods