Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 16, Problem 12E
A(1)
To determine
Compute inventory turnover ratio.
A(2)
To determine
Compute number of days’ sales in inventory.
b)
To determine
Conclude position of inventory.
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QT, Inc. and Elppa Computers, Inc. compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions):
QT
Elppa
Sales
$35,040
$46,400
Cost of goods sold
29,200
43,800
Inventory, beginning of period
932
4,028
Inventory, end of period
1,132
4,828
a. Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory. Round your calculations and answers to one decimal place. Assume 365 days a year.
(refer to image)
b. QT has a ______ (higher/lower) inventory turnover ratio than does Elppa Company. Likewise, QT has a _____ (larger/smaller) number…
You have just been appointed as financial manager of Slow-Moving-Stock Limited. One of your
main focus areas is to improve the inventory management system that the company currently
has in place. You have extracted the following records from the Inventory Management
Software.
ITEM X4355
January
February
March
April
May
June
July
August
September
October
November
December
Normal days for delivery
Maximum days for delivery
Cost of placing an order
Carrying cost of a unit per year
Total
Sales (u)
1500
1300
1200
1100
1100
1100
1500
1600
1700
1800
2500
1900
18300
a) Determine and comment on the inventory days ratio. (
b) Determine the appropriate reorder level for Item X4355.
c) Determine the Economic order quantity for Item X4355. (
5
8
R850
R250
Trading
days
20
18
20
19
20
21
22
20
20
21
22
17
240
You also found that total purchases for all items for the year was R55 000 000 with the end of
year inventory value being R26 000 000.
Inventory Analysis
QT, Inc. and Elppa Computers, Inc. compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the
other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions):
QT
Elppa
Sales
$52,560
$65,800
Cost of goods sold
43,800
62,050
Inventory, beginning of period
1,856
7,339
Inventory, end of period
2,056
8,539
a. Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory. Round your calculations and answers to one decimal place. Assume 365 days a year.
QT
Elppa
1. Inventory turnover
2. Number of days' sales in inventory
days
days
Chapter 16 Solutions
Managerial Accounting
Ch. 16 - Prob. 1DQCh. 16 - What is the advantage of using comparative...Ch. 16 - Prob. 3DQCh. 16 - Prob. 4DQCh. 16 - Prob. 5DQCh. 16 - What do the following data, taken from a...Ch. 16 - Prob. 7DQCh. 16 - Prob. 8DQCh. 16 - The dividend yield of Suburban Propane Partners,...Ch. 16 - Prob. 10DQ
Ch. 16 - Prob. 1BECh. 16 - Prob. 2BECh. 16 - The following items are reported on a companys...Ch. 16 - Prob. 4BECh. 16 - Prob. 5BECh. 16 - Prob. 6BECh. 16 - Prob. 7BECh. 16 - Prob. 8BECh. 16 - Prob. 9BECh. 16 - Prob. 10BECh. 16 - Prob. 11BECh. 16 - Prob. 1ECh. 16 - The following comparative income statement (in...Ch. 16 - Prob. 3ECh. 16 - Prob. 4ECh. 16 - Prob. 5ECh. 16 - The following data were taken from the balance...Ch. 16 - PepsiCo, Inc. (PEP), the parent company of...Ch. 16 - Current position analysis The bond indenture for...Ch. 16 - Prob. 9ECh. 16 - Accounts receivable analysis Xavier Stores Company...Ch. 16 - Prob. 11ECh. 16 - Prob. 12ECh. 16 - Ratio of liabilities to stockholders equity and...Ch. 16 - Hasbro, Inc. (HAS), and Mattel, Inc. (MAT), are...Ch. 16 - Recent balance sheet information for two companies...Ch. 16 - Prob. 16ECh. 16 - Prob. 17ECh. 16 - Prob. 18ECh. 16 - Prob. 19ECh. 16 - Prob. 20ECh. 16 - Prob. 21ECh. 16 - Prob. 22ECh. 16 - Prob. 23ECh. 16 - Prob. 24ECh. 16 - Prob. 25ECh. 16 - Comprehensive income Anson Industries, Inc.,...Ch. 16 - Prob. 1PACh. 16 - Prob. 2PACh. 16 - Prob. 3PACh. 16 - Measures of liquidity, solvency, and profitability...Ch. 16 - Prob. 5PACh. 16 - Prob. 1PBCh. 16 - Prob. 2PBCh. 16 - Prob. 3PBCh. 16 - Prob. 4PBCh. 16 - Prob. 5PBCh. 16 - Prob. 1MADCh. 16 - Prob. 2MADCh. 16 - Deere Company (DE) manufactures and distributes...Ch. 16 - Marriott International, Inc. (MAR), and Hyatt...Ch. 16 - Prob. 1TIFCh. 16 - Real-world annual report The financial statements...Ch. 16 - Prob. 3TIF
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