Inventory Ratio Calculations Delroi, Inc. provided the following data for 2008 and 2009: Inventory December 31,...
Inventory Ratio Calculations
Delroi, Inc. provided the following data for 2008 and 2009:
| Inventory | |
| December 31, 2007 | $210,000 |
| December 31, 2008 | 190,500 |
| December 31, 2009 | 182,200 |
| Cost of goods sold | |
| 2008 | $622,000 |
| 2009 | 744,000 |
| Gross margin | |
| 2008 | $340,000 |
| 2009 | 420,000 |
Round all calculations to two decimal places.
(a) Calculate the inventory turnover ratio for 2008 and 2009.
2008 Answer times
2009Answer times
(b) Calculate the gross margin return on inventory investment for
2008 and 2009.
2008 Answer
2009 Answer
(c) The fact that Delroi's inventory levels have fallen over the
past two years, while gross margin has increased, is an indication
that Delroi is becoming more lean in its operations.
AnswerTrueFalse
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Homework Answers
Delroi, inc.
| Ratio | 2008 | 2009 | |
| Inventory turnover ratio | Cost of goods sold / Average Inventory |
622,000/{(210,000+190,500)/2} = 622,000/200,250 = 3.11 times |
744,000/{(182,200+190,500)/2} = 744,000/186,350 = 4.00 times |
| Gross margin return on Inventory investment | Gross margin / Average inventory |
340,000/200,250 = 169.80% |
420,000/186,350 = 225.38% |
C) Delroi, inc.'s inventory turnover ratio and Gross margin have been increased. Which indicated company Increasing margin by maintaining less Inventory than past year to operation hence no wastage and over utilisation of resources leads to Great margins, this clearly indicates that "this organisation is becoming more lean in it's operations". The statement is valid.
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Inventory Ratio Calculations
Delroi, Inc. provided the following data for 2008 and 2009:
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