Question

In: Accounting

Machlin provided the following data for 2008 and 2009: Inventory December 31, 2007 $174,000 December 31,...

Machlin provided the following data for 2008 and 2009:

Inventory
December 31, 2007 $174,000
December 31, 2008 187,000
December 31, 2009 196,000
Cost of goods sold
2008 $547,000
2009 586,000
Gross margin
2008 $253,000
2009 291,000

Do not round until your final answers. Round all calculations to two decimal places.

(a) Calculate the inventory turnover ratio for 2008 and 2009.
2008 ___ times
2009 ____ times

(b) Calculate the gross margin return on inventory investment for 2008 and 2009.
2008 _____
2009 _____

Solutions

Expert Solution

(a) Calculate the inventory turnover ratio for 2008 and 2009.

Average inventory 2008 = (174000+187000/2) = 180500

Average inventory 2009 = (187000+196000/2) = 191500

Inventory turnover ratio = Cost of goods sold/average inventory

                             2008 = 547000/180500 = 3.03 Times

                             2009 = 586000/191500 = 3.06 times

(b) Calculate the gross margin return on inventory investment for 2008 and 2009.

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

                                                     2008             = 253000*100/180500 = 140.17%

                                                    2009              = 291000*100/191500 = 151.96%

ekkarill92 answered 7 months ago
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