Large retailers like the Home Depot and Walmart typically use gross margin ratio (gross margin/sales), inventory turnover (sometimes referred to as inventory turns) and gross margin return on investment (GMROI) to evaluate how well inventory has been managed. The goal is to maximize profits while minimizing the investment in inventory. Below are the data for four scenarios, a base scenario (# 1) followed by three modifications (#s 2, 3, and 4) to the base scenario.

1 2 3 4

For each scenario calculate the gross margin percent, the inventory turnover, and GMROI. Show work.

Transcribed Image Text:

Sales S10000 $20000 $12000 $10000 Cost of goods sold Gross profit 6000 6000 12000 6000 $8000 $4000 $4000 S6000 Average inventory $6000 $6000 $6000 $5000