The owner of a large machine shop has just finished its financial analysis from

Question

The owner of a large machine shop has just finished its financial analysis from the prior fiscal year. Following is an excerpt from the final report: Net revenue Cost of goods sold Value of production materials on hand Value of work-in-process inventory Value of finished goods on hand $378,000 323,000 42,500 55,000 21,500 a. Compute the inventory turnover ratio (ITR). (Round your answer to 1 decimal place.) Inventory turnover ratio per year b. Compute the weeks of supply (WS). (Do not round intermediate calculations. Round your answer to 1 decimal place.) Weeks of supply Hints References

Explanation / Answer

a)

Inventory turnover ratio = Cost of goods sold/(Inventory)

Inventory turnover ratio = 323000/(42500+55000+21500) = 2.71

Inventory turnover ratio = 2.71 per year

b) Weeks of supply = No of weeks/ Inventory turnover ratio

Weeks of supply = 52/2.71 = 19.2

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