The following data (in millions) were taken from recent annual reports of Tomato

Question

The following data (in millions) were taken from recent annual reports of Tomato Computer, Inc., a manufacturer of personal computers and related products, and Happy Times Corporation, a manufacturer and distributor of greeting cards and related products:

Tomato Happy Times

Cost of merchandise sold $6,916,000 $3,266,550

Inventory, end of year 129,000 160,000

Inventory, beginning of the year 79,000 197,000

a. Determine the inventory turnover for Tomato and Happy Times. Round to one decimal place.

Tomato

Happy Times

b. Would you expect Happy Times’s inventory turnover to be higher or lower than Tomato’s?

Explanation / Answer

Calculation of Inventory Turnover :

Inventory Turnover of Happy Times is lower than the Tomatos' inventory turnover.

Tomato Happy Times Cost of merchandise sold (A)    69,16,000          32,66,550 Closing Inventory      1,29,000            1,60,000 Opening Inventory          79,000            1,97,000 Average Inventory (B)      1,04,000            1,78,500 Inventory Turnover = (A) / (B) 67 18 (Times)

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