Joe, the owner of Genuine Reproductions (GR), a company that manufactures reprod
ID: 460645 • Letter: J
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 $3,200,000. The average inventory in dollars was $300,000.
a. Calculate the inventory turnover for GR. Inventory Turnover =
(Round your answer to 2 decimal places, the tolerance is +/-0.01. Do not round your intermediate computations.)
b. Calculate the weeks of supply. Assume 52 weeks per year.
Weeks of Supply = weeks
(Round your answer to 2 decimal places, the tolerance is +/-0.02. Do not round your intermediate computations.)
c. Calculate the days of supply. Assume that GR operates 5 days per week.
Days of Suply = days
(Round your answer to 2 decimal places, the tolerance is +/-0.02. Do not round your intermediate computations.)
Explanation / Answer
Given:
Cost of goods sold at GR = $3,200,000
Average inventory = $300,000
a.
The inventory turnover for GR:
Inventory turnover ratio = Cost of Goods Sold ÷ Average Stock = $3,200,000 / $300,000 = 10.66667 =11 times.
b.
Calculation of the weeks of supply, assuming 52 weeks per year
Weeks of supply = 52 ÷ Inventory turnover = 52 ÷ 11 = 4.727273 = 4.73 weeks.
c.
Calculation of the days of supply, assuming that GR operates 5 days per week:
Total days in year = 5 days per week × 52 = 260 days
Days of supply = 260 ÷11 = 23.63636 = 23.64 days
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