The Following Data Were Taken from the Annual Reports of Big

question 101

Essay

The following data were taken from the annual reports of Big Bang Inc., a manufacturer of fireworks, and Orange Inc., a manufacturer of computers.​ $$\begin{array} { | l | r | r | } \hline & \text { Big Bang Inc. } & { \text { Orange Inc. } } \\\hline \text { Cost of merchandise sold } & \$ 830,000 & \$ 11,540,000 \\\hline \text { Inventory, end of year } & 190,000 & 320,000 \\\hline \text { Inventory, beginning of year } & 240,000 & 290,000 \\\hline\end{array}$$ (a) Determine the
(1) inventory turnover and
(2) days' sales in inventory for Big Bang and Orange.Round your answers to two decimal places.
(b) How would you expect these measures to compare between the companies? Why?

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Definitions:

Raw Materials Inventory

Goods and materials that are used in the manufacturing process to be converted into finished products, tracked in accounts as a current asset.

FOH Volume Variance

The difference between the budgeted and actual volume of production, affecting fixed overhead costs.

FOH Budget Variance

The difference between the actual factory overhead costs and the budgeted or standard overhead costs allocated for a period.

Labor Efficiency Variance

The difference between the actual hours worked and the expected hours worked, valued at the standard labor rate.