Suppose the Robinson Company had a cost of goods sold of $1,000,000 in 20 0 and

Question

Suppose the Robinson Company had a cost of goods sold of $1,000,000 in 20 0 and $1,200,000 in 2011.

2010 2011
Cash and marketable securities $ 50,000 $ 50,000
Accounts receivable 300,000 350,000
Inventories 350,000 500,000
Total current assets $700,000 $900,000
Accounts payable $200,000 $250,000
Bank loan 0 150,000
Accruals 150,000 200,000
Total current liabilities $350,000 $600,000


a. Calculate the inventory turnover for each year. Comment on your ?ndings.

b. What would have been the amount of inventories in 2011 if the 2010 turnover ratio had been maintained?

Explanation / Answer

inventory turnover = cogs/inventory a.inventory turnover for 2010 =$1,000,000/350,000 =2.857 inventory turnover for 2011 =$1,200,000/500,000 =2.4 b. $1,200,000/inventory =2.857 Inventory for 2011= $420,000

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