The following data were taken from the financial records of Mydorf Company.Net SalesBeginning inventoryPurchasesEnding inventory(1) Inventory turnover(2) Days in inventory(b)2022$6,420,000940,0004,340,0001,020,00020224.8 times76 daysBI UT₂ T² Ix!!!2021!!!$6,240,000860,0004,661,000940,0002021What conclusions concerning the management of the inventory can be drawn from these data?5.0 times73 days399áT

Inventory turnover ratio is a measure of number of times the inventory is used or sold in a given period such as a year. For most industries, good inventory turnover ratio is between 5 and 10 times. Inventory turnover ratio=Net sales/average inventory at selling price Number of days in inventory shows average number of days the inventory is stored in the warehouse.Lower number of days in inventory is the better.If inventory is stored in the warehouse for large number of days, then this may be because of the lower demand of the product. Number of days in inventory=365 days/inventory turnover ratio From the given data of Mydorf company, the conclusion regarding inventory which can be drawn is that inventory turnover ratio is better in 2021 but it slightly goes down in 2022 and accordingly number of days in inventory increases in 2022. Net sales increases in 2022 but stock stored in warehouse for more days which increases storage cost. The management has to consider the inventory turnover ratios and other ratios and then has to make any decision.

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The following data were taken from the financial records of Mydorf Company. Net Sales Beginning inventory Purchases Ending inventory 2022 $6,420,000 (1) Inventory turnover (2) Days in inventory (b) 940,000 4,340,000 1,020,000 2022 2021 76 days $6,240,000 860,000 4,661,000 940,000 2021 4.8 times 5.0 times 73 days What conclusions concerning the management of the inventory can be drawn from these data?

The following data were taken from the financial records of Mydorf Company. Net Sales Beginning inventory Purchases Ending inventory 2022 $6,420,000 (1) Inventory turnover (2) Days in inventory (b) 940,000 4,340,000 1,020,000 2022 2021 76 days $6,240,000 860,000 4,661,000 940,000 2021 4.8 times 5.0 times 73 days What conclusions concerning the management of the inventory can be drawn from these data?

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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