Question

Inventory Analysis QT, Inc. and Elppa Computers, Inc. compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions): QT Elppa Sales $39,420 $50,300 Cost of goods sold 32,850 47,450 Inventory, beginning of period 1,214 5,00B Inventory, end of period 1,414 5,808 a. Determine for both companies (1) the inventory turnover and (2) the number one decimal place. Assume 365 days a year. days' sales in inventory. Round your calculations and answers to QT Elppa 1. Inventory turnover 6.2 X 2.2 2. Number of days' sales in inventory 58.4 x days 166.6 x days b. QT has a lower X inventory turnover ratio than does Elppa Company. Likewise, QT has a larger X number of days' sales in inventory. Check My Work 1 more Check My Work uses remaining, < Previous Next > All work saved. Email Instructor Save and Exit Submit Assignment for Gradina

Answer 1

(1)-Inventory Turnover for QT and Elppa

Inventory Turnover for QT = Cost of goods sold / Average Inventory

= $32,850 / [($1,214 + $1,414)/2]

= $32,850 / $1,314

= 25.0 Times

Inventory Turnover for Elppa = Cost of goods sold / Average Inventory

= $47,450 / [($5,008 + $5,808)/2]

= $47,450 / $5,408

= 8.8 Times

(2)-Number of days sales in inventory for QT and Elppa

Number of days sales in inventory for QT = 365 Days / Inventory turnover ratio

= 365 Days / 25.0 Times

= 14.6 Days

Number of days sales in inventory for Elppa = 365 Days / Inventory turnover ratio

= 365 Days / 8.8 Times

= 41.5 Days

Qt has a “LARGER” has a lower inventory turnover ratio than does Elppa Company. Likewise, QT has a “LOWER” number of days sales in inventory.