The average inventory at Hamilton Industries, comprising raw materials, work-in-process, and finished goods, was found to be $17.2 million last year. If the cost of goods sold per week averaged $1.32 million, what was the inventory turnover experienced by Hamilton Industries? Assume the company had 50 working weeks per year.
A) less than or equal to 3.50
B) greater than 3.50 but less than 3.75
C) greater than 3.75 but less than 4.00
D) greater than 4.00

Question

Quizplus · Accepted Answer

Inventory turnover is calculated as cost of goods sold divided by average inventory. So, based on the given information: 
- Cost of goods sold per year = $1.32 million x 50 weeks = $66 million 
- Average inventory = $17.2 million 
- Inventory turnover = $66 million / $17.2 million = 3.84
Therefore, the inventory turnover experienced by Hamilton Industries was greater than 3.75 but less than 4.00, which corresponds to choice C.

The Average Inventory at Hamilton Industries, Comprising Raw Materials, Work-In-Process