Use the Following Selected Financial Information to Answer the Questions

question 39

Essay

Use the following selected financial information to answer the questions that follow.
$\begin{array}{lrrr}&\text { Year } 3&\text { Year } 2&\text { Year }1\\\text { Inventory } & \$ 56,000& \$ 64,000 & \$ 53,000 \\\text { Total assets } & 1,205,000 & 952,000 & 945,000 \\ \text { Cost of goods sold } & 360,000 & 420,000 & 440,000\\\text { Net income } & 65,000&25,000&16,000 \\\end{array}$

A) Calculate this company's inventory turnover ratid for Year 3 and Year 2.

B) Determine the number of days it would take to turn over the entire inventory at December 31, Year 3 and Year 2.

C) What problens are apparent with the compary's inventory management?

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Definitions:

Labor-Hours

The total number of working hours clocked by employees within a specific period, reflecting the labor input.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual units of output on the basis of some common activity, such as machine-hours or labor hours.

Labor Cost

The total expense incurred by a company for the compensation of its employees.

Machine-Hours

A measure of the amount of time a machine is operated, used in cost accounting to allocate machine-related expenses to products.