Inventory and Correct Answer. a.

Topics: Inventory, Revenue, The Unit Pages: 3 (474 words) Published: April 17, 2012
Chapter 2: Basic process thinking

PROOFSMART INC.

ProofSmart Inc., a supplier of home insulation materials, was burned down in a recent fire. From the remains of what used to be the accounting ledger, the following information was recovered:

| |2006 |2007 | |Inventory |\$2,367,121 |\$2,418,257 | |Gross Margin |42% |45% | |Inventory Turns |11 |[unreadable] |

Prior to the fire, ProofSmart saw a sales growth of 48% in 2007, a record performance for the 18 year-old company. (NOTE: Gross margin is defined as 1-(COGS/Sales).)

What was the sales for 2007?
Circle the answer closest to the correct answer.

a. \$318,000
b. \$38,000,000
c. \$43,000,000
d. \$66,000,000
e. \$85,000,000
f. cannot be determined from the data given

2006 COGS = 2,367,121 * 11 = \$26,038,331
2006 Sales = 26,038,331 / (1-42%) = \$44,893,674
2007 Sales = 44,893,674 * 148% = \$66,442,638

What was the inventory turns for 2007?
Circle the answer closest to the correct answer.

a. 10
b. 11
c. 12
d. 13
e. 14
f. 15
g. cannot be determined from the data given
h. none of the above

2007 COGS = 66,442,638 * (1-45%) = \$36,543,451
2007 Inventory Turns = 36,543,451/2,418,257 = 15

Cheap Retailers

The following table shows financial data (year 2006) for Dirt Cheap Wholesale and Kwiki-Mart, two US retailers.

| |DIRT CHEAP WHOLESALE |KWIKI-MART STORES | |Inventories (\$MM) |4754...

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