Danier Leather Inc. manufactures and sells high- quality, fashionable leather clothing and accessories. The company€™s business is seasonal, as are most retail businesses. Historically, more than 40 percent of the company€™s total annual sales have been generated during its second fiscal quarter (October€“December), which includes the holiday selling season. The company€™s results of operations depend significantly upon the sales generated during this period. A variety of factors affect sales, including fashion trends, competition, economic conditions, the timing of merchandise releases and promotional events, changes in merchandise assortment, success of marketing programs, cross- border shopping, and weather conditions, among others. The following table provides selected financial information for two recent years. All amounts are in thousands:

Required:
1. Compute the gross profit and the inventory turnover ratio for fiscal years 2011 and 2012.
2. Compute the company€™s gross profit for each quarter. What does the seasonal pattern of the gross profit reveal?
3. Is there a seasonal pattern in inventory balances? Would Danier€™s choice of fiscal year- end affect the inventory turnover ratio computed in (1)? Explain.
4. Re-compute Danier€™s inventory turnover ratios for 2012 based on the average of the quarterly balances of ending inventory instead of the annual balances. Is there a significant difference between this ratio and the ratio computed in (1)? Explain.

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Time Period Net Sales Cost of Sales Ending Inventory $26,539 36,413 41,163 31,138 28,964 28,964 39,775 36,789 28,383 24,891 24,891 Fiscal year 2010 23,427 61.442 46,039 26,713 157,621 22,091 59,497 39,131 27,510 148,219 $11,161 25,500 22,827 11,845 71,333 10,401 26,328 20,364 14,420 71,513 First quarter 2011 Second quarter 2011 Third quarter 2011 Fourth quarter 2011 Fiscal year 2011 First quarter 2012 Second quarter 2012 Third quarter 2012 Fourth quarter 2012 Fiscal year 2012