Cyberphone, a manufacturer of cell phone accessories, ended the current year wit

Question

Cyberphone, a manufacturer of cell phone accessories, ended the current year with annual sales (at cost) of $54 million. During the year, the inventory of accessories turned over six times. For the next year, Cyberphone plans to increase annual sales (at cost) by 20 percent same inventory turnover during the next year? S(Enter your response as an integer.) b. What change in inventory turns must Cyberphone achieve if, through better supply chain management, it wants to support next year's sales with no increase in the average aggregate inventory value? turns. (Enter your response rounded to one decimal place.)

Explanation / Answer

Inventory Turnover Ratio = (Cost of goods sold)/(Average Inventory)

Old Annual sales = $54 million

Inventory Turnover ratio = 6

Average Inventory = Old Annual Sales/ Inventory Turnover ration = 54/6 =$ 9 million

New Annual Sales = 1.2*54 Million =$64.8 Million

a)

Inventory Turnover ratuion = 6 = New Annual sales/ New Average Inventory = 64.8 /New Average Inventory

New Average Inventory = 64.8/6 = $ 10.8 Million

b) Annual sales = $64.8 million

Aaverage Inventory = old Averahe Inventory value = $9 million

New Inventory Turnover ratio = 64.8/9 = 7.2 turns or times

so the inventory turns should be increase to 7.2 turns

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