The Inventory Turnover for an Industry Is 6 (Every Two

question 79

Essay

The inventory turnover for an industry is 6 (every two months)but Slow Corp. turns over its inventory 4 times a year (every three months).  If annual sales are $1,000,000 and the interest cost to carry inventory is 12 percent, what is the potential savings in interest expense if the firm achieves the industry for the turnover of its inventory?

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Definitions:

Opportunity Cost

Opting for one opportunity causes the relinquishment of possible gains from not selected alternatives.

Production Possibilities Curve

The Production Possibilities Curve (PPC) is a graphical representation that shows the maximum quantity of two goods or services that can be produced with limited resources.

Future Location

Refers to a place where something is expected or planned to be situated at a later time.

Economic Generalizations

General statements that summarize common relationships or patterns within an economy, often derived from empirical observations and economic theory.