Accounting Question: Current Year Inventory Turnover Ratios (Coursework Sample)

Name
Course Instructor
Subject
Date
Current year inventory turnover ratios
BIBLIOGRAPHY \l 1033 Louwers, et al. Auditing & Assurance Services, 6e. New York: McGraw-Hill Education, 2013. Print. (P. 713, D-47)
Inventory turnover ($000) = Cost of goods sold/ Average inventory

Beginning Inventory

Ending Inventory

Average Inventory

Cost of Goods Sold

Inventory Turnover

Total inventory

3000

2917

2958.5

7400

7400/298.5 = 2.5

Materials and parts

1365

620

992.5

3970

3970/992.5 = 4

Work-in-progress

623

697

660

7988

7988/660 = 12.1

Computer games

380

500

440

2200

2200/440 = 5

Flash drives

64

300

182

2000

2000/182 = 11

Semiconductor parts

80

400

240

2400

2400/240 = 10

Keyboards

488

400

444

800

800/444 = 1.8

In general, there is a positive trend in total inventory turnover with a high of 2.5 from 2.1. Trend variability exists in the finished products section with a steady rise in semiconductor parts but a declining trend in keyboards. The current year firm’s sales amount to $10 million with an overall increment of 12% in sales volume. However, slight to no change condition characterizes the product lines of the firm.
Memo: Internal Audit of Inventory
To: The Vice President, Production
From: Internal Audit Officer
Date: February 10, 2017
Subject: Preliminary report of inventory turnover analysis
This report shows the computed turnover ratios and the prevalent investment conditions in the inventory and overall performance of our company. The report also indicates possible causes to inventory problems and solutions which are open to your views for further investigations.
Inventory Turnover
20112012201320142015
Finished products:
Computer games6.07.010.024.05.0
Flash drives 8.07.27.78.511.0
Semiconductor parts4.03.54.57.010.0
Keyboards 3.02.52.01.91.8
Work-in-process12.012.511.511.712.1
Materials and parts4.04.14.34.54.0
Total inventory2.12.02.12.12.5
Flash drives and semiconductor parts: Both show an inventory increment at the end ($64,000-300,000 and 80,000-400,000). Increase in inventory has enhanced the rise in sales demand. However, large inventory turnover at the end of the year would negatively affect the following year’s inventory. The computer games’ decline from 24.0 to 5.0 reflects the scenario of poor production monitoring and inventory holding in line with sales forecasts.
Computer...