Inventory Turned Over Seven Times During the Year at Rockdale

question 30

Multiple Choice

Inventory turned over seven times during the year at Rockdale Electronics. Similar electronics retailers have an inventory turnover equal to twelve times per year. Which of the following best explains the state of Rockdale's inventory management?

• A)The company sold too much inventory during the year.
• B)The company needs to increase sales and decrease the amount of inventory on hand.
• C)The company is performing much better than its competitors.
• D)The company should increase the amount of goods on hand to accommodate the growth in inventory demand.

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Definitions:

Underapplied

A situation in accounting where the allocated costs are less than the actual costs incurred.

Cost of Goods Sold

The immediate expenses related to manufacturing the products a company sells, comprising costs for materials and labor.

Job-Order Costing System

A costing method used to accumulate costs of production by job or batch, suitable for manufacturing processes producing unique products or jobs.

Overapplied

Refers to a situation where the manufacturing overhead allocated to products is more than the actual manufacturing overhead incurred.