A company reported the following data: ?Year 1Year 2Cost of goods sold$317,500$279,100Average inventory72,00093,000Required:1. Calculate the company's merchandise inventory turnover for each year.2. Comment on the company's efficiency in managing its inventory.
What will be an ideal response?
1. Year 1 $317,500/72,000 = 4.41
Year 2 $279,100/93,000 = 3.00
2. The company's efficiency in managing its inventory is decreasing as its sales of merchandise decrease. This is a negative reflection on inventory management.
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