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14 November, 22:36

A manufacturing company producing medical devices reported $60 million in sales over the last year. At the end of the same year, the company had $20 million worth of inventory of ready-to-ship devices. Assuming that units in inventory are valued (based on cost of goods sold) at $1000 per unit and are sold for $2000 per unit, what is the company's annual inventory turnover?

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  1. 14 November, 23:28
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    Annual average inventory in days (no of times) = 1.5 times

    Explanation:

    Annual inventory turn over is the average length of time it takes for inventor to be sold and replaced.

    Average inventory turnover = average inventory / cost of sold * 365

    Average inventory turnover (in No of times) = Cost of sold sold / average inventory

    Cost of goods sold

    = (1000/2000) * 60 million

    = $30 million

    Closing Inventory = $20 million

    Annual average inventory

    = $20 / 30 * 365 days

    = 243. days

    Annual average inventory

    = cost of sold sold / average inventory

    =30/20

    = 1.5 times

    Annual average inventory in days = 243. days

    Annual average inventory in days (no of times) = 1.5 times
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