Inventory Ratio Calculations Anka, Inc. provided the following data for 2016 and

Question

Inventory Ratio Calculations
Anka, Inc. provided the following data for 2016 and 2017:

Round all calculations to two decimal places.
(a) Calculate the inventory turnover ratio for 2016 and 2017.
2016 Answer

times
2017 Answer

times

(b) Calculate the gross margin return on inventory investment for 2016 and 2017.
2016 Answer

2017 Answer

Inventory December 31, 2015 $ 404,800 December 31, 2016 571,200 December 31, 2017 365,000 Cost of goods sold 2016 $ 1,284,000 2017 $ 1,448,000 Gross margin 2016 $ 680,000 2017 820,000

Explanation / Answer

Average inventory for 2016 = (404,800 + 571,200) / 2 = 488,000

Average inventory for 2017 = (571,200 + 365,000) / 2 = 468,100

a.

Inventory turnover ratio = Cost of goods sold / Average inventory

Inventory turnover ratio for 2016 = 1,284,000 / 488,000 = 2.63 times.

Inventory turnover ratio for 2017 = 1,448,000 / 468,100 = 3.09 times.

b.

Gross margin return on inventory investment = Gross margin / Average inventory

Gross margin return on inventory investment for 2016 = 680,000 / 488,000 = 1.39 times.

Gross margin return on inventory investment for 2017 = 820,000 / 468,100 = 1.75 times.

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