Maple Leaf, Inc., a television manufacturer, would like to reduce its inventory.
ID: 376031 • Letter: M
Question
Maple Leaf, Inc., a television manufacturer, would like to reduce its inventory. To this end, you are asked by the operations manager to assess its inventory level. You have the following information on average inventories from last year's financial statement: Raw materials $2,500,000 Work-in-process $1,000,000 Finished goods $ 800,000 In addition, the cost of goods sold last year (50 weeks) was $12 million. What was the inventory turnover?
A) Less than or equal to 2
B) Greater than 2 but less than 3
C)Greater than 3 but less than 4
D) Greater than 4
Explanation / Answer
Total average inventory = $2500000+$1000000+$800000
= $4300000
Cost of goods sold = $12000000
Inventory turnover = cost of goods sold / Average inventory
= 12000000 / 4300000
= 2.79
So the answer is option b