Sensitron and Douglas Tools Manufacture and Market Power Tools and Accessories.Sensitron

question 55

Essay

Sensitron and Douglas Tools manufacture and market power tools and accessories.Sensitron targets customers in the professional contractor market,while Douglas Tools focuses on home users and professionals.Both firms use the same cost flow assumption for valuing inventories and cost of goods sold.Selected financial data for the companies appears below.
$\begin{array}{lrrr}\text { Sensitron } & \mathbf{2 0 1 0} & \mathbf{2 0 0 9} & \mathbf{2 0 0 8} \\\text { Cost of Goods Sold } & \$ 1,144,200 & \$ 1,134,100 & \$ 1,169,400 \\\text { Average Inventory } & 372,550 & 397,050 & 436,870 \\\text { Change in Sales from previous year } & 0.64 \% & -3.68 \% & 11.83 \% \\& & & \\\text { Douglas Tools } & \mathbf{2 0 1 0} & \mathbf{2 0 0 9} & \mathbf{2 0 0 8} \\\text { Cost of Goods Sold } & \$ 2,876,100 & \$ 2,846,600 & \$ 2,889,000 \\\text { Average Inventory } & 730,550 & 778,100 & 797,500 \\\text { Change in Sales from previous year } & 3.50 \% & -5.12 \% & 0.59 \%\end{array}$

Required:
1.Calculate the inventory turnover ratio for each firm for year 2010,2009,and 2008.
2.Suggest reasons for the differences in the Inventory turnover ratios for these two firms.

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Definitions:

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