calculate Inventory turnover ratio

A company that manufactures clothing (DTKs Kidzone) for children is growing fast. The CEO has decided to reconfigure the supply chain in order to cope with growing customer demands and to take advantage of potential cost savings overseas. The manufacturing operations are being moved to China while some distribution centres are moved to Eastern Europe to provide better service to a growing market there. While these changes are being made the CEO is targeting an improvement on stock-holding costs and has requested some data oninventory turns. The following data has been provided for the previous year trading.

            Production materials                         $1,360,000
            Work in progress                                     3,250,000
            Finished goods                                     5,010,000
The total cost of goods sold last year was $25 million.
The industry average for inventory turnover is 3.1.


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