Question

Fulmer company has an inventory turnover ratio of 6. Their Annual CoGS are $750,000. If I were to walk through the facility and count their inventory value, what is the value of inventory I would expect to find? O 1) $4,500,000 2) $750,000 O 3) $375,000 O 4) $125,000 Save Question 18 (1 point) The Operations Manager at Alamo Sporting Goods has been told to increase his Inventory Turnover Ratio from the current level of 6 turns per year to 9 turns per year. Unfortunately he thinks an Inventory Turnover Ratio has something to do with breakfast pastries. So, he has hired you as a consultant. What must he do to increase the Inventory Turnover Ratio? O 1) Cut his holding cost O 2) Increase inventory level O 3) Increase Sales 0 4) Decrease Average Inventory Level ?5) C and/or D

Answer 1

Answer 17

Option 4

Inventory turnover ratio = cost of goods sold ÷ average inventory

6 = $750,000 ÷ average inventory

Average inventory = $750,000 ÷ 6

= $125,000

Answer 18

Option 5

The inventory turnover ratio could be calculated as

Inventory turnover ratio = COGS ÷ average inventory

OR

Inventory turnover ratio = sales ÷ average inventory

In order to increase the inventory turnover ratio the operation manager has to work on the components which form the ratio and thus the manager could either increase the level of sales or cogs as they have direct relationship with the ratio or decrease the level of average inventory as it has inverse relationship with the ratio