Baker Mfg Inc. wishes to compare its inventory turnover to those of industry lea

Question

Baker Mfg Inc. wishes to compare its inventory turnover to those of industry leaders, who have turnover of about 13 times per year and 8% of their assets invested in inventory.

a.) What is Baker’s inventory turnover? __times per year (round your response to two decimal places)

b.) What is Baker’s percent of assets committed to inventory? ___% (enter your responses as a percentage rounded to two decimal places).

c.) How does Baker’s performance compare to the industry leaders? a. In line with industry b. Better c. Worse

Baker Mfg. Inc. Net Revenue $27,500 Cost of sales $21,090 Inventory $1,280 Total assets $16,570

Explanation / Answer

a.) What is Baker’s inventory turnover?

inventory turnover = Cost of sales / inventory

= $21,090 / $1280

= 16.48

b.) What is Baker’s percent of assets committed to inventory?

Inventory investment = Inventory/total assets

= $1280/16570

= 0.0772 = 7.72%

c.) How does Baker’s performance compare to the industry leaders?

B Better

Baker is doing better then the industry. It has turnover of 16.48 versus 13 for the industry and only 7.72 % of the assets invested in inventory versus 8% for the industry

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