Please show the calculation. A company\'s Cost of Goods Sold (COGS) for the 1\"
ID: 410993 • Letter: P
Question
Please show the calculation.
A company's Cost of Goods Sold (COGS) for the 1" quarter of 2017 was S1,500,000. On January 1,2017 the company held S425,000 in inventory and on March 31 2017 it held S575,000. Assume that quarterly COGS increased S250,000 every quarter of 2017 (For example 2nd QTR COGS were 1,750,000), and that the company increased inventory holdings by S150,000 every quarter (Otr1 Ending Inventory 575,000; Qtr 2 Ending Inventory $725,000 etc.) 3.What were the company's inventory turns in quarters 2,3, & 4? 4. What was the companies annual inventory turns for 2017?Explanation / Answer
(1)
Average Inventory = (Beginning inventory + Ending inventory) / 2
Beginning Inventory (01-Jan-17) = $425,000
Ending Inventory (31-Mar-17) = $575,000
Average Inventory = ($425,000 + $575,000) / 2 = $500,000
(2)
Number of inventory turns = CoGS / Average Inventory = $1,500,000 / $500,000 = 3
(3)
(4)
For the entire year,
Total CoGS = $1,500,000+$1,750,000+$2,000,000+$2,250,000 = $7,500,000
Beginning Inventory (01-Jan-17) = $425,000
Ending Inventory (31-Dec-17) = $1,025,000
Average Inventory = ($425,000 + $1,025,000) / 2 = $725,000
So, number of inventory turns = CoGS / Avg. Inventory = $7,500,000 / $725,000 = 10.34
Qtr1 Qtr2 Qtr3 Qtr4 CoGS $1,500,000 $1,750,000 $2,000,000 $2,250,000 Beginning Inventory $425,000 $575,000 $725,000 $875,000 Ending Inventory $575,000 $725,000 $875,000 $1,025,000 Average Inventory=(B.I. + E.I.) / 2 $500,000 $650,000 $800,000 $950,000 Inventory turns
= CoGS / Avg. Inevntory 3.00 2.69 2.50 2.37