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29 April, 18:05

Using the information below, compute the raw materials inventory turnover:

a. Raw Materials Used $ 104,500 Beginning

b. Raw Materials Inventory 9,900 Ending

c. Raw Materials Inventory 12,800

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Answers (1)
  1. 29 April, 19:26
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    The raw material inventory turnover is 9.2 times or 40 days

    Explanation:

    This problem requires us to compute raw material inventory turnover. The inventory turnover ratio is calculated by dividing the inventory used for a period by the average inventory for that period. Average inventory is used instead of ending inventory because many companies' merchandise fluctuates greatly throughout the year.

    So RM inventory turnover = RM used/Average inventory

    = 104,600/11,350*

    = 9.2 times or 40 days**

    * Average inventory = (9,900 + 12,800) / 2

    * * (365/9.2) = 40 days
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