A corporation is projecting annual sales at $35 million, cost of goods sold (COGS) at $25 million, and administrative expenses at $3 million. In order to meet its corporate inventory turns goal of 5.0, their inventory level must average:
A corporation is projecting annual sales at $35 million, cost of goods sold (COGS) at $25 million, and administrative expenses at $3 million. In order to meet its corporate inventory turns goal of 5.0, their inventory level must average:
To determine the average inventory level required to meet the corporate inventory turns goal, we use the formula: Average Inventory = Cost of Goods Sold (COGS) / Inventory Turns. Given that the COGS is $25 million and the inventory turns goal is 5.0, the calculation is as follows: Average Inventory = $25 million / 5.0 = $5 million.
B. Average inventory level = Annual cost of goods sold / Inventory turns goal Average inventory level = $25 million / 5.0 = $5 million
=25/5=5
Had the exam same question today at my exam. Average inventory = Cost of goods sold / Inventory turnover, therefor answer B should be correct.
Yes, I think B as the formula is Inventory turnover ratio = Cost of goods sold / Average inventory
Nobody think $5 is the right answer???