(a) Cody Company sells three different categories of tools (small, medium, and large). The cost and market...
Question:
(a) Cody Company sells three different categories of tools (small, medium, and large). The cost and market value of its inventory of tools are as follows
Determine the value of the company’s inventory under the lower-of-cost-or-market approach.
(b) Early in 2017, Yeng Company switched to a just-in-time inventory system. Its sales, cost of goods sold, and inventory amounts for 2016 and 2017 are shown below.
Determine the inventory turnover and days in inventory for 2016 and 2017. Discuss the changes in the amount of inventory, the inventory turnover and days in inventory, and the amount of sales across the twoyears.
Cost Market Small Medium Large 64,000 290,000 152,000 73,000 260,000 171,000 2016 $3,120,000 1,200,000 180,000 220,000 2017 Sales Cost of goods sold Beginning inventory Ending inventory $3,713,000 1,425,000 220,000 100,000
Step by Step Answer:
a The lowest value for each inventory type is Small 64000 Med...View the full answer
Accounting Principles
ISBN: 978-1118875056
12th edition
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso
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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