Rome Corporation is a supplier of ball bearings. Because of the specialized manufacturing process employed, considerable work-in-process and raw material inventories are created
The current inventory levels are $1,500,000 and $3,775,000, respectively. In addition, finished goods inventory is $3,500,000, and sales (at cost) for the current year are expected to be about $28 million. Assume they operate 50 weeks per year.
a. What is their total inventory (measured as weeks of supply)?
b. What is their inventory turnover?
a. Weeks of supply = average aggregate inventory value/weekly sales at cost =
(1,500,000 + 3,775,000 + 3,500,000 )/(28,000,000/50 ) = 15.7 weeks
b. Inventory turnover = annual sales (at cost)/average aggregate inventory value =
28 million/8.775 million = 3.19
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