Inventory Ratio Calculations McMahan, LTD. provided the following data for 2008

Question

Inventory Ratio Calculations McMahan, LTD. provided the following data for 2008 and 2009: Inventory December 31, 2007 $178,000 December 31, 2008 185,000 December 31, 2009 193,000 Cost of goods sold 2008 $544,000 2009 592,000 Gross margin 2008 $257,000 2009 286,000 Do not round until your final answers. Round all calculations to two decimal places. (a) Calculate the inventory turnover ratio for 2008 and 2009. 2008 Answer 2009 (b) Calculate the gross margin return on inventory investment for 2008 and 2009. 2008 2009

Explanation / Answer

2007 2008 2009 COST OF GOODS SOLD 544000 592000 OPENING INVENTORY 178000 185000 CLOSING INVENTORY 185000 193000 AVERAGE INVENTORY 181500 189000 INVENTORY TURNOVER 2.997245 3.132275132 2008 2009 GROSS MARGIN RETURN ON INVENTORY INVESTMENT 257000 286000 AVERAGE INVENTORY 181500 189000 GROSS MARGIN RETURN ON INVENTORY INVESTMENT 1.415978 1.513227513

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