### Inventory and Gross Margin Analysis#### Question 12.27:Great Northern Textiles has a total inventory equivalent to 46 days of cost of goods sold, while its competitor, Trendwise Fashions, has an inventory equivalent to 58 days of cost of goods sold. Great Northern reported a gross margin as a percentage of sales of 40%, and Trendwise reported a gross margin as a percentage of sales of 44%. If Great Northern had sales of $1.567 billion and Trendwise had sales that were 15% less than its competitor, what is the approximate ratio of total inventory of Great Northern to Trendwise?**Answer Choices:**- A) 0.85- B) 1.26- C) 0.79- D) 1.0#### Explanation:1. **Calculate Sales for Trendwise:** - Great Northern Sales: $1.567 billion - Trendwise Sales: 15% less than Great Northern - Trendwise Sales = $1.567 billion × (1 - 0.15) - Trendwise Sales = $1.567 billion × 0.85 - Trendwise Sales = $1.332 billion (approximately)2. **Calculate Cost of Goods Sold (COGS):** - Great Northern Gross Margin = 40% - COGS of Great Northern = Sales - (Sales × Gross Margin) - COGS of Great Northern = $1.567 billion - ($1.567 billion × 0.40) - COGS of Great Northern = $1.567 billion - $0.6268 billion - COGS of Great Northern = $0.9402 billion - Trendwise Gross Margin = 44% - COGS of Trendwise = Sales - (Sales × Gross Margin) - COGS of Trendwise = $1.332 billion - ($1.332 billion × 0.44) - COGS of Trendwise = $1.332 billion - $0.58608 billion - COGS of Trendwise = $0.74592 billion 3. **Calculate Total Inventory:** - Great Northern Total Inventory (46 days of COGS): - (46 / 365) × $0.9402 billion - Inventory = 0.12603 ×

Gross Margin in the business is the ratio of gross profit with sales revenue of the company. Gross…

Q 12.27: Great Northern Textiles has total inventory equivalent to 46 days of cost of goods sold while its competitor, Trendwise Fashions, has inventory equivalent to 58 days of cost of goods sold. Great Northern reported gross margin as percentage of sales of 40% and Trendwise reported gross margin as percentage of sales of 44%. If Great Northern had sales of $1.567 billion and Trendwise had sales 15% less than its competitor, what is the approximate ratio of total inventory of Great Northern to Trendwise? A 0.85 B 1.26 0.79 D 1.0

Q 12.27: Great Northern Textiles has total inventory equivalent to 46 days of cost of goods sold while its competitor, Trendwise Fashions, has inventory equivalent to 58 days of cost of goods sold. Great Northern reported gross margin as percentage of sales of 40% and Trendwise reported gross margin as percentage of sales of 44%. If Great Northern had sales of $1.567 billion and Trendwise had sales 15% less than its competitor, what is the approximate ratio of total inventory of Great Northern to Trendwise? A 0.85 B 1.26 0.79 D 1.0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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