Maple Leaf,Inc. ,a television manufacturer,would like to reduce its inventory.To this end,you are asked by the operations manager to assess its inventory level.You have the following information on average inventories from last year's financial statement: Raw materials $2,500,000
Work-in-process $1,000,000
Finished goods $ 800,000
In addition,the cost of goods sold last year (50 weeks)was $15 million.What was the inventory turnover?

Question

Quizplus · Accepted Answer

The inventory turnover is calculated as the cost of goods sold divided by the average inventory. The total average inventory is $4,300,000 ($2,500,000 + $1,000,000 + $800,000). The inventory turnover is $15,000,000 / $4,300,000 = approximately 3.49, which is greater than three but less than four.