Akers Inc. maintains average inventory of $1,000,000 (at cost). Last year, Akers sales volume was $10,000,000 and
Question:
Akers Inc. maintains average inventory of $1,000,000 (at cost). Last year, Akers sales volume was $10,000,000 and cost of goods sold was $7,000,000. Akers has determined that its inventory carrying cost is 15% annually. What was the inventory turnover rate? How much was inventory carrying cost for the year?
Step by Step Answer:
Inventory turnover rate cost of good...View the full answer
Managing Operations Across the Supply Chain
ISBN: 978-0078024030
2nd edition
Authors: Morgan Swink, Steven Melnyk, Bixby Cooper, Janet Hartley
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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