A Firm Is Planning for Next Year and Has Developed

question 109

Multiple Choice

A firm is planning for next year and has developed the following information. $\begin{array}{ll}\text { Thisyear's sales } & \$ 7.90 \mathrm{M} \\\text { Next year's sales } & \$ 9.48 \mathrm{M} \\\text { This year's inventory } & \$ 2.37 \mathrm{M}\\\text { This ye a1's cost ratio* } & 60.0 \% & * \text { Cost of goods sold (COGS) } \\\text { Next year's cost ratio* } & 55.0 \% & \text { as a } \% \text { of sales }\end{array}$ What inventory balance should be included in next year's plan if management intends to increase inventory turnover by two turns in the coming year? Calculate using ending balances and the COGS formulation of inventory turnover.

• A) $1.74M
• B) $1.90M
• C) $1.30M
• D) $1.24M

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Definitions:

Passive Margin

A tectonically inactive edge of a continent along which there is no significant volcanic or earthquake activity, typically characterized by a broad continental shelf.

Compression

The act of pressing together; in geology, it refers to the stress applied to materials causing a decrease in volume or shortening.

Thrust Faulting

A geological process where one rock layer is pushed up over another, often leading to mountain building.

Overriding Plate

The tectonic plate that sits above another plate at a convergent boundary, often responsible for mountain building and volcanic activity.