Joe, the owner of Genuine Reproductions (GR), a company that manufactures reprod

Question

Joe, the owner of Genuine Reproductions (GR), a company that manufactures reproduction furniture, is interested in measuring inventory effectiveness. Last year the cost of goods sold at GR was $3,300,000. The average inventory in dollars was $300,000.

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Joe, the owner of Genuine Reproductions (GR), a company that manufactures reproduction furniture, is interested in measuring inventory effectiveness. Last year the cost of goods sold at GR was $3,300,000. The average inventory in dollars was $300,000.

Explanation / Answer

Inventory turnover ratio = Cost of Goods Sold / Average Stock = $3,300,000 / $300,000 = 11 times.

Weeks of supply = 52 / Inventory turnover = 52 / 11 = 4.73 weeks.

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