Corporal Inc. and Admiral Company compete with each other in the personal computer market.
Corporal's primary strategy is to assemble computers to customer orders, rather than for inventory.
Thus, for example, Corporal will build and deliver a computer within four days of a customer entering an order on a Web page.
Admiral, on the other hand, builds some computers prior to receiving an order, then sells from this inventory once an order is received.
Below is selected financial information for both companies from a recent year's financial statements (in millions):
|Corporal Inc.||Admiral Company|
|Cost of goods sold||51,100||73,000|
|Inventory, beginning of period||1,734||6,860|
|Inventory, end of period||1,934||8,060|
a. Determine for both companies
(1) the inventory turnover and
(2) the number of days' sales in inventory.
(Round your calculations and answers to one decimal place.) Assume 365 days a year.
|1. Inventory turnover|
|2. Number of days' sales in inventory||_days||_days|
b. Corporal has a higher/lower inventory turnover ratio than does Admiral Company.
Likewise, Corporal has a larger/smaller number of days' sales in inventory.
Inventory turnover and Number of days' sales in inventory :
"Inventory turnover" is calculated by dividing the average inventory to the cost of goods sold during the year. "Number of days' sales in inventory" is calculated by dividing the cost of goods sold to ending inventory multiply by 365.
Answer and Explanation: 1
(1)Inventory turnover Ratio is calculated below:
Inventory turnover Ratio = Cost of Goods Sold/Average Inventory
See full answer below.
Become a member and unlock all Study Answers
Start today. Try it nowCreate an account
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
fromChapter 6 / Lesson 13
Inventory turnover is the ratio of how much a company has sold its products and replaced its supply during a specific period of time. Learn more about the definition of inventory turnover, formulas used for computing it, and the calculation steps for determining it.