The following data were taken from the annual reports of Jong Inc. and Hobson In

Question

The following data were taken from the annual reports of Jong Inc. and Hobson Inc.
Cost of goods sold $830,000 (Jong Inc) $11,540,000 (Hobson Inc)
Inventory, end of year $185,000 (Jong) $315,000 (Hobson)
Inventory, beginning of year $235,000 (Jong) $155,000 (Hobson)

A. Determine the inventory Turnover and number of day's sales in inventory for Jong and Hobson, round answer to two decimal places.

B. How would you expect these measures to compare between the companies? Why?

I think I have A right(Jong 3.95 turnover... 92.34 days, Hobson 49.11 turnover...7.43 days), but I dont know what to say for B, any help is greatly appriciated.

Explanation / Answer

A. Determine the inventory Turnover and number of day's sales in inventory for Jong and Hobson, round answer to two decimal places.

Jong Inc.: 3.95 {$830,000/[($185,000 + $235,000)/2]}

Apple: 49.11 {$11,540,000/[($315,000 + $155,000)/2]}

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B. How would you expect these measures to compare between the companies? Why?

Jongs business is seasonal in nature, with most of its revenue generated during the major holidays, much of its nonholiday inventory may turn over very slowly.

Hobson, on the other hand, turns its inventory over very fast because it maintains a low inventory, which allows it to respond quickly to customer needs.

, Hobsons computer products can quickly become------------ obsolete, so it cannot risk building large inventories

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