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COMM 217
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81 Estimate the amount of inventories that your company purchased and produced during the current year2011 p33Beginning Inventory510068Purchases of merchandise during the yearXEnding Inventory442409 Cost of Sales1846470510068X4422091846470X177881182 What inventory costing method does the company use Why do you think the company made this choiceI believe this company uses the perpetual inventory system The advantage of using a perpetual inventory system is that it allows for more timely information with regard to quantities and costs of inventory increasing informations relevance to important decision makers 83 Ratio Analysisa What do the inventory turnover and the average days to sell inventory measure in generalThe inventory turnover ratio measures how many times the average inventory was produced and sold during a time periodInventory turnover Cost of Sales Average inventoryThe average days to sell inventory is the days in year divided by the inventory turnover ratio It measures in how many days the inventory is soldAverage days to sell inventory Days in YearInventory Turnoverb If your company reports inventories compute these ratios for the last three years If the company does not report the cost of sales COS separately assume that COS equal 70 percent of the sales amount201120102009Inventory Turnover184647017789381634570Cost of 44240951006825100683998662399866509467SalesAverage 359Inventory388301Average Days Turnover36538894073653011212636535910167Days in YearInventory Turnoverc What do your results suggest about the companyIn 2011 the average inventory was produced and sold 388 times and took 9407 days to sell the inventory In 2010 the average inventory was produced and sold 301 times and took 12126 days to sell the inventory Lastly in 2009 the average inventory was produced and sold 359 times and took 10167 days to sell Aside from the minor slowdown in business in 2010 we can conclude that 2011 was a better year for inventory turnoverPages usedPage 3page 34
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