Question

I want to make sure that all of the work I have thus far is correct. And I need the answers to the analysis
On January 1, 2021, the general ledger of Big Blast Fireworks includes the following account balances: Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Accounts Payable Notes Payable (9%, due in 3 years) Common Stock Retained Earnings Totals Debit Credit $ 23,900 41,500 $ 5,100 40,000 76,600 27,400 40,000 66,000 43,500 $182,000 $182,000 The $40,000 beginning balance of inventory consists of 400 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions: January 3 Purchase 1,900 units for $205,200 on account ($108 each). January 8 Purchase 2,000 units for $226,000 on account ($113 each). January 12 Purchase 2,100 units for $247,800 on account ($118 each). January 15 Return 150 of the units purchased on January 12 because of defects. January 19 Sell 6,100 units on account for $915,000. The cost of the units sold is determined using a FIFO perpetual inventory system. January 22 Receive $885,000 from customers on accounts receivable. January 24 Pay $650,000 to inventory suppliers on accounts payable. January 27 Write off accounts receivable as uncollectible, $3,500. January 31 Pay cash for salaries during January, $124,000.

Answer 1

a) Inventory turnover ratio = Cost of Goods Sold / Average Inventory
= $686300 / 27500 = 24.96
Average Inventory = ($40000+15000)/2 = $27500

The company is managing its inventory more efficiently, since ratio has increased

b) Gross Profit Ratio = Gross Profit / Sales x 100
= $228700/915000 = 24.99%

The company is less profitable

c) selling higher volume at lower prices