Question

Suppose this information is available for PepsiCo, Inc. for 2020, 2021, and 2022.

(in millions)		2020		2021		2022
Beginning inventory		$1,700		$2,300		$2,500
Ending inventory		2,300		2,500		2,600
Cost of goods sold		17,000		20,160		19,635
Sales revenue		38,900		44,500		44,420

(a)

Calculate the inventory turnover for 2020, 2021, and 2022. (Round inventory turnover to 1 decimal place, e.g. 5.1.)

		2020			2021			2022
Inventory turnover		enter an inventory turnover	times		enter an inventory turnover	times		enter an inventory turnover	times

Answer 1

(a) Calculation of inventory turnover

Inventory turnover = Cost of goods sold / Average inventory

  Average inventory for 2020 = Beginning inventory + Ending inventory / 2

= $1,700 + $2,300 / 2

= $2,000

   Inventory turnover (2020) = $17,000 / $2,000  

= 8.5 times

Average inventory for 2021 = $2,300 + $2,500 / 2

= $2,400   

Inventory turnover (2021) = $20,160 / $2400

= 8.4 times

   Average inventory for 2022 = $2,500 + $2600 / 2

= $2,550

Inventory turnover ( 2022 ) = $19,635 / $2550

= 7.7 times