In Comparison of 2010 to 2009 Performance,Watson Company's Inventory Turnover

question 29

Essay

In comparison of 2010 to 2009 performance,Watson Company's inventory turnover decreased substantially,although sales and inventory amounts were essentially unchanged.
Required:
During a corporate meeting you heard the following managers postulate why the decreased inventory turnover ratio happened.Which statement best explains the decreased inventory turnover ratio and why?
a.The marketing manager said: The decreased inventory turnover ratio is due to an increase in the cost of goods sold.
b.The operations manager said: The decreased inventory turnover ratio is due to increased gross profit percentage.
c.The credit manager said: The decreased inventory turnover ratio is due to a decrease in the accounts receivable turnover.
d.The shipping manager said: The decreased inventory turnover ratio is due to inventory being shipped FOB destination point that keeps those items in inventory until they reach the purchasers warehouse.

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Definitions:

Percentile

A score indicating the percentage of scores in its frequency distribution that are equal to or lower than it.

SAT

A globally recognized college admission test that evaluates a student's readiness for college, focusing on subjects like mathematics and evidence-based reading and writing.

Norm-Referenced Test

A type of test designed to compare and rank test takers in relation to one another.

Measures of Central Tendency

Statistical metrics that describe the center point or typical value of a dataset, including mean, median, and mode.