Question

In: Accounting

A shoe department experienced the following merchandise activity for the first quarter of the year. A)...

A shoe department experienced the following merchandise activity for the first quarter of the year. A) Determine the departmental turnover for the period. Then, B) Interpret your numerical answer in words (i.e. For every $1.00 invested.....).

BOM (retail) (the numbers)

January $9,500

February $11,800

March $9,700

April $12,300

Gross sales $9200

Returns 8%

Cumulative markup 51%

Solutions

Expert Solution

Inventory turnover ratio is computed by dividing the cost of goods sold by average inventory at cost. The formula/equation is given below:

Inventory turnover ratio = Cost of Goods sold/Average inventory at Cost

Two components of the formula of inventory turnover ratio are cost of goods sold and average inventory at cost

So,

  1. Cost of goods sold is derived by the subtracting profit from the Sales price
  2. And Average inventory is derived by the average of beginning stock and ending period stock

Hence, the Calculations are

Woking Note

  1. Selling Value      = Gross Sales + Sales mark-up value(Gross Sales * Mark-up percentage)

= $9200+ ($9200*51%)

=$9200+$4692

=$13892

  1. COGS =Selling value – Profit(Selling value*Return rate)

=$13892–$1111.36(13892*8%)

=$12780.64

  1. Average Stock = beginning stock + Ending Stock/2

= ($9,500 + $12,300)/2

=$10900

Answer of the question are

Departmental turnover ratio = Cost of Goods Sold / Average stock

                                                = $12780.64/$10900

                                                =1.17

ekkarill92 answered 1 year ago
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