Chapter 9

Inventories
Accounting, 21st Edition
Warren Reeve Fess

© Copyright 2004 South-Western, a division

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Professor Emeritus of Accounting
Pepperdine University
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 Objectives
Objectives
1. Summarize and provide examples of internal control
procedures that After
applystudying
After this
to inventories.
studying this
2. Describe the effect
chapter,of inventory
you errors on the financial
should
statement. chapter, you should
3. Describe the three be be able
able to:
inventory to:
cost flow assumptions
and how they impact the income statement and
balance sheet.
4. Compute the cost of inventory under the perpetual
inventory system, using the following cost methods:
first-in, first-out; last-in, first-out; average cost.
 Objectives
Objectives
5. Compute the cost of inventory under the
periodic inventory system, using the
following costing methods: first-in, first-out;
last-in, first-out; average cost.
6. Compare and contrast the use of the three
inventory costing methods.
7. Compute the proper valuation of inventory at
other than cost, using the lower-of-cost-or-
market and net realization value concepts.
8. Prepare a balance sheet presentation of
merchandise inventory.
 Objectives
Objectives
9. Estimate the cost of inventory, using the
retail method and the gross profit method.
10. Compute the interpret the inventory
turnover ratio and number of days’ sales in
inventory.
Why is Inventory Control Important?
Important
 Inventory is a significant asset and for many
companies the largest asset.
 Inventory is central to the main activity of
merchandising and manufacturing companies.
 Mistakes in determining inventory cost can cause
critical errors in financial statements.
 Inventory must be protected from external risks (
such as fire and theft) and internal fraud by
employees.
Receiving Purchase
report AGREE order

AG

E
RE

RE
E Invoice

AG
JOURNAL
Post.
Date
Description
Ref.
Nov. 9 Inventory 1 222 00
Accounts Payable--XYZ Co. 1 222 00
Purchased merchandise on
account.
 Effect
Effect of
of Inventory
Inventory Errors
Errors on
on
Financial
Financial Statements
Statements
LIABILITIES

Merchandise ASSETS OWNER’S

Inventory EQUITY

Net Income

Cost of COSTS & REVENUES

Merchandise Sold EXPENSES

overstated
IfIfmerchandise
merchandiseinventory
inventoryisis.............. understated
Cost
Costof
ofmerchandise
merchandisesold
soldisis............ overstated
overstated
Gross
Grossprofit
profitand
andnet
netincome
incomeare are......
Ending
Endingowner’s
owner’sequity
equityisis..................
 Effect
Effect of
of Inventory
Inventory Errors
Errors on
on
Financial
Financial Statements
Statements

IfIfmerchandise inventoryisis.............. understated

merchandiseinventory
Cost
Costof
ofmerchandise soldisis............ overstated
merchandisesold
Gross
Grossprofit
profitand
andnet
netincome
incomeare are...... understated
Ending
Endingowner’s equityisis.................. understated
owner’sequity
Inventory
Inventory Cost
Cost Flow
Flow Assumptions
Assumptions
Purchased
Purchased
goods
goods

Sold
Sold
goods
goods
Inventory
Inventory Cost
Cost Flow
Flow Assumptions
Assumptions

Sold
Purchased
Sold
Purchased
goods
goods
goods
goods
Inventory
Inventory Cost
Cost Flow
Flow Assumptions
Assumptions

Purchased
Purchased Sold
Sold
goods
goods goods
goods
 Inventory
Inventory Costing
Costing Methods
Methods
43%
40%
34%
30%

19%
20%

10%
4%
0%
Fifo Lifo Average Other
 Perpetual
Perpetual Inventory
Inventory Costs
Costs
Inventory
Inventorycost
costdata
datato
todemonstrate
demonstrate
FIFO
FIFOand
andLIFO
LIFOPerpetual
PerpetualSystems
Systems
Item
Item127B
127B Units
Units Cost
Cost Price
Price
Jan.
Jan. 11 Inventory
Inventory 10
10 $20
$20
4Cost
4 Saleof
Sale 77 $30
$30
10
10 Purchase
Mdse. Sold
Purchase 88 21
21
22
22 Sale
Sale 44 31
31
28
28 Sale
Sale 22 32
32
30
30 Purchase
Purchase 10
10 22
22
 FIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200

The firm begins the year with 10

units of Item 127B on hand at a
total cost of $200.
FIFO Perpetual Inventory Account

Inventory
Inventorycost
costdata
datato
todemonstrate
demonstrate
FIFO
FIFOand
andLIFO
LIFOPerpetual
PerpetualSystems
Systems
Item
Item127B
127B Units
Units Cost
Cost Price
Price
Jan.
Jan. 11 Inventory
Inventory 10
10 $20
$20
4Cost
4 Saleof
Sale 77 $30
$30
10
10 Purchase
Mdse. Sold
Purchase 88 21
21
22
22 Sale
Sale 44 31
31
28
28 Sale
Sale 22 32
32
30
30 Purchase
Purchase 10
10 22
22

On
On January
January 4,
4, 77 units
units of
of Item
Item
127B
127B are
are sold
sold at
at $30
$30 each.
each.
 FIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200
4 7 20 140 3 20 60

The
The sale
sale of
of 77 units
units leaves
leaves aa
balance
balance of of 33 units.
units.

On
On January
January 4,
4, 77 units
units of
of Item
Item
127B
127B are
are sold
sold at
at $30
$30 each.
each.
FIFO Perpetual Inventory Account

Inventory
Inventorycost
costdata
datato
todemonstrate
demonstrate
FIFO
FIFOand
andLIFO
LIFOPerpetual
PerpetualSystems
Systems
Item
Item127B
127B Units
Units Cost
Cost Price
Price
Jan.
Jan. 11 Inventory
Inventory 10
10 $20
$20
4Cost
4 Saleof
Sale 77 $30
$30
10
10 Purchase
Mdse. Sold
Purchase 88 21
21
22
22 Sale
Sale 44 31
31
28
28 Sale
Sale 22 32
32
30
30 Purchase
Purchase 10
10 22
22

On
On January
January 10,
10, the
the firm
firm purchased
purchased
eight
eight units
units at
at $21
$21 each.
each.
 FIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200
4 7 20 140 3 20 60
10 8 21 168 3 20 60
8 21 168

Because the purchase price of $21 is

different than the cost of the previous 3
units On
on hand, the inventory
January 10, the balance of
firm
On January 10, the firm
11 units is accounted for separately.
purchased
purchased eight
eight units
units at
at $21
$21 each.
each.
FIFO Perpetual Inventory Account

Inventory
Inventorycost
costdata
datato
todemonstrate
demonstrate
FIFO
FIFOand
andLIFO
LIFOPerpetual
PerpetualSystems
Systems
Item
Item127B
127B Units
Units Cost
Cost Price
Price
Jan.
Jan. 11 Inventory
Inventory 10
10 $20
$20
4Cost
4 Saleof
Sale 77 $30
$30
10
10 Purchase
Mdse. Sold
Purchase 88 21
21
22
22 Sale
Sale 44 31
31
28
28 Sale
Sale 22 32
32
30
30 Purchase
Purchase 10
10 22
22

On
On January
January 22,
22, the
the firm
firm sold
sold
four
four units
units for
for $31
$31 each.
each.
 FIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

On January 22,
On January 22, the the
Unit Total Unit Total Unit Total
firm
Date firm
sold
Qty. sold
four
Cost four
units
units
Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1
for
for $31
$31 each.
each. 10 20 200
4 7 20 140 3 20 60
10 8 21 168 3 20 60
8 21 168
22 3 20 60
1 21 21 7 21 147

Of the four units sold, three are

from the first units in (fifo) at a
cost of $20.
FIFO Perpetual Inventory Account

Inventory
Inventorycost
costdata
datato
todemonstrate
demonstrate
FIFO
FIFOand
andLIFO
LIFOPerpetual
PerpetualSystems
Systems
Item
Item127B
127B Units
Units Cost
Cost Price
Price
Jan.
Jan. 11 Inventory
Inventory 10
10 $20
$20
4Cost
4 Saleof
Sale 77 $30
$30
10
10 Purchase
Mdse. Sold
Purchase 88 21
21
22
22 Sale
Sale 44 31
31
28
28 Sale
Sale 22 32
32
30
30 Purchase
Purchase 10
10 22
22

On
On January
January 28,
28, the
the firm
firm
sold
sold two
two units
units at
at $32.
$32.
 FIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200
4 7 20 140 3 20 60
10 8 21 168 3 20 60
8 21 168
22 3 20 60
1 21 21 7 21 147
28 2 21 42 5 21 105

On
On January
January 28,
28, the
the firm
firm
sold
sold two
two units
units at
at $32.
$32.
 FIFO Perpetual Inventory Account

Inventory
Inventorycost
costdata
datato
todemonstrate
demonstrate
FIFO
FIFOand
andLIFO
LIFOPerpetual
PerpetualSystems
Systems
Item
Item127B
127B Units
Units Cost
Cost Price
Price
Jan.
Jan. 11 Inventory
Inventory 10
10 $20
$20
4Cost
4 Saleof
Sale 77 $30
$30
10
10 Purchase
Mdse. Sold
Purchase 88 21
21
22
22 Sale
Sale 44 31
31
28
28 Sale
Sale 22 32
32
30
30 Purchase
Purchase 10
10 22
22

On
On January
January 30,
30, purchased
purchased ten
ten additional
additional
units
units of
of Item
Item 127B
127B at
at $22
$22 each.
each.
 FIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200
4 On
On January
January 30,
30, purchased
purchased
7 20 140 3 20 60
10 8ten
ten additional
21 168 units
additional units of
of Item
Item 3 20 60
8 21 168
22
127B
127Bat at $22
$223each.
each. 20 60
1 21 21 7 21 147
28 2 21 42 5 21 105
30 10 22 220 5 21 105
10 22 220
Totals 18 $388 13 $263 15 $325
 LIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200

The
The firm
firm begins
begins thethe year
year with
with
10
10 units
units of of Item
Item 127B
127B onon
hand
hand atat aa total
total cost
cost of
of $200.
$200.
 LIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200
4 7 20 140 3 20 60

On
On January
January 4,4, the
the firm
firm sold
sold
77 units
units at
at $30
$30 each.
each.
 LIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200
4 7 20 140 3 20 60
10 8 21 168 3 20 60
8 21 168

On
On January
January 10,
10, the
the
firm
firm purchased
purchased eight
eight Note
Note that
that aa new
new
units layer
layer isis formed.
formed.
units at
at $21
$21 each.
each.
 LIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200
4 7 20 140 3 20 60
10 8 21 168 3 20 60
8 21 168
22 4 21 84 3 20 60
4 21 84
OnOfJanuary
Of
On the
January 22,
the 44 units the
22,sold,
units the all
sold, all come
come
firm
fromfirm
from thesells
most
sells
the four
most recent
recent purchase
four purchase
units
unitsatat
at aa $31
at costeach.
cost
$31 of
of $21
$21 each.
each. each.
 LIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200
4 7 20 140 3 20 60
10 8 21 168 3 20 60
8 21 168
22 4 21 84 3 20 60
4 21 84
28 2 21 42 3 20 60
2 21 42

On
On January
January 28,
28, sold
sold
two
two units
units at
at $32
$32 each.
each.
 LIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200
4 7 20 140 3 20 60
10 8 21 168 3 20 60
8 21 168
22 4 21 84 3 20 60
4 21 84
28 2 21 42 3 20 60
2 21 42
30 10 22 220 3 20 60
2 21 42
On
On January
January 30,30, purchase
purchase 10 22 220
10
10 units
units at
at $22
$22 each.
each.
 LIFO Perpetual Inventory Account
Item 127B

Purchases Cost of Mdse. Sold Inventory Balance

Unit Total Unit Total Unit Total

Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost
Jan. 1 10 20 200
4 7 20 140 3 20 60
10 8 21 168 3 20 60
8 21 168
22 4 21 84 3 20 60
4 21 84
28 2 21 42 3 20 60
2 21 42
30 10 22 220 3 20 60
2 21 42
10 22 220
Totals 18 $388 13 $266 15 $322
 Fifo
Periodic
 Fifo
Fifo Periodic
Periodic
200 units @ $9 Jan. 1 Beginning
Inventory
300 units @ $10 Mar. 10 Purchase

400 units @ $11 Sept. 21 Purchase

100 units @ $12 Nov. 18 Purchase

1,000 units available
for sale during
year
 Fifo
Fifo Periodic
Periodic
200 units @ $9 = $1,800 Jan. 1

300 units @ $10 = 3,000 Mar. 10

400 units @ $11 = 4,400 Sept. 21

100 units @ $12 = 1,200 Nov. 18

1,000 units available $10,400
for sale during
year Cost of merchandise
available for sale
 Fifo
Fifo Periodic
Periodic
A
A physical
physical count
count on
on
December
December 31 31 reveals
reveals that
that
700
700 of
of the
the 1,000
1,000 units
units
have
have been
been sold.
sold.

Using
Using fifo,
fifo, the
the first
first units
units
purchased
purchased are are theoretically
theoretically thethe
first
first units
units sold.
sold. We We begin
begin the
the
count
count with
with January
January 1. 1.
 Fifo
Fifo Periodic
Periodic
Soldunits
200 these@200
$9 = $1,800
$ 0 Jan. 1

Soldunits
300 these@300
$10 = 3,000
0 Mar. 10

Sold
400
200 units
200 of
@these
$11 = 4,400
2,200 Sept. 21

100 units @ $12 = 1,200 Nov. 18

1,000 units available $10,400
$ 3,400
for sale during
year Ending inventory
 Fifo
Fifo Periodic
Periodic

Cost
Cost of
of merchandise
merchandise available
available for
for sale
sale $10,400
$10,400
Less
Less ending
ending inventory
inventory 3,400
3,400
Cost
Cost of
of merchandise
merchandise sold
sold $$ 7,000
7,000
 Summary of Fifo Periodic
Cost of
Merchandise Merchandise
Available Sold
Purchases for Sale
$1,800 200 units at $9
Jan. 1
200 units at $9 $1,800
$3,000 300 units at $10
Mar. 10
300 units at $10 $3,000 200 units at $11
$2,200
Sep. 21
$7,000 700 units
400 units at $11 $4,400
Merchandise
Nov. 18
100 units at $12 $1,200 Inventory
$2,200 200 units at $11
1,000 units $10,400
$1,200 100 units at $12

$3,400 300 units

 Lifo
Periodic
 Lifo
Lifo Periodic
Periodic
200 units @ $9 Jan. 1 Beginning
Inventory
300 units @ $10 Mar. 10 Purchase

400 units @ $11 Sept. 21 Purchase

100 units @ $12 Nov. 18 Purchase

1,000 units lifo,
Using
Using available
lifo, the
the most
most recent
recent batch
batch
for sale during
purchased
purchased isis considered
considered the
the first
first
year
batch of merchandise sold.
batch of merchandise sold.
 Lifo
Lifo Periodic
Periodic
Jan. 1 Beginning
200 units @ $9 Assume
Assume again
again that
that
Inventory
700
700 units
units were
were sold
sold
300 units @ $10 Mar.during
10 Purchase
the
during the year.
year.
400 units @ $11 Sept. 21 Purchase

100 units @ $12 Nov. 18 Purchase

1,000 units available
for sale during
year
 Lifo
Lifo Periodic
Periodic
200 units @ $9 = $1,800 Jan. 1

Sold
100 200 of
300 units @these
$10 = 3,000
1,000 Mar. 10

400
Soldunits
these@400
$11 = 4,4000 Sept. 21

100
Soldunits
these@100
$12 = 1,2000 Nov. 18
1,000 units available $10,400
$2,800
for sale during
year Ending Inventory
 Lifo
Lifo Periodic
Periodic

Cost
Cost of
of merchandise
merchandise available
available for
for sale
sale $10,400
$10,400
Less
Less ending
ending inventory
inventory 2,800
2,800
Cost
Cost of
of merchandise
merchandise sold
sold $$ 7,600
7,600
 Summary
Summary of
of Lifo
Lifo Periodic
Periodic
Cost of
Merchandise Merchandise Sold
Available
Purchases for Sale $1,800 200 units at $9
$1,800
Jan. 1 $1,000 100 units at $10
200 units at $9 $1,800
$2,800 300 units
Mar. 10
300 units at $10 $3,000 Cost of
Merchandise
Sep. 21 Sold
400 units at $11 $4,400
$2,000 200 units at $10
Nov. 18
100 units at $12 $1,200
$4,400 400 units at $11

1,000 units $10,400

$1,200 100 units at $12

$7,600 700 units

 Average
Average Cost
Cost Periodic
Periodic

200 units @ $9 Jan. 1 Beginning

The
The average
average cost
cost Inventory
periodic
periodic method
method isis
300 units @ $10 Mar. 10 Purchase
based
based on the average
on the average
cost
cost
400 units of
of identical
@ $11 identical
Sept. units.
units.
21 Purchase

100 units @ $12 Nov. 18 Purchase

1,000 units available
for sale during
year
 Average
Average Cost
Cost Periodic
Periodic
200 units @ $9 = $ 1,800

300 units @ $10 = $ 3,000

400 units @ $11 = $ 4,400

100 units @ $11 = $ 1,200

1,000 units available $10,400 Cost of

for sale during merchandise
year available for
sale
 Average
Average Cost
Cost Periodic
Periodic
Cost of Merchandise
Available for Sale
= Average Unit Cost
Units Available for Sale
During Year

$10,400
= $10.40 per Unit
1,000 Units
 Average
Average Cost
Cost Periodic
Periodic

Cost
Cost of
of merchandise
merchandise available
available for
for sale
sale $10,400
$10,400
Less
Less ending
ending inventory
inventory ($10.40
($10.40 xx 300)
300) 3,120
3,120
Cost
Cost of
of merchandise
merchandise sold
sold $$ 7,280
7,280
To verify this
amount, multiply
700 units sold
times $10.40 to get
the same $7,280.
 Valuation of Inventory at
Lower-of-Cost-or-Market
Unit Unit
Inventory Cost Market Total Total Lower
Item Quantity Price Price Cost Market C or M

A 400 $10.25 $ 9.50 $ 4,100 $$3,800

3,800
B 120 22.50 24.10 2,700 2,700
2,892
4,650
C 600 8.00 7.75 4,800 4,650
3,920
D 280 14.00 14.75 3,920 4,130
Total $15,520 $15,472$15,070

The market decline based on individual items

($15,520 – $15,070) = $450
 Presentation of Merchandise Inventory
on the Balance Sheet
Metro-Arts
Balance Sheet
December 31, 2007
Assets
Current assets:
Cash $ 19 400 00
Accounts receivable $80 000 00
Less allowance for
doubtful accounts 3 000 00 77 000 00
Merchandise inventory
at lower of cost (first-in,
first-out method) or market 216 300 00
Estimating
Estimating Inventory
Inventory Cost
Cost
Retail Method of Estimating Inventory Cost
 Retail method is based on relationship between cost of
merchandise available for sale and the retail price.
 Retail prices of all merchandise must be accumulated and totaled.
 Inventory at retail is calculated at retail price of merchandise
available for sale less net sales at retail.
 Ratio is calculated as cost divided by retail price.
 Inventory at retail price times cost ratio equals estimated cost of
inventory.
 Retail
Retail Inventory
Inventory Method
Method
Cost Retail
Merchandise inventory, Jan. 1 $19,400 $ 36,000
Purchases in January (net) 42,600 64,000
Merchandise available for sale $62,000 $100,000
$62,000
Ratio of cost to retail price = = 62%
$100,000

Step
Step 1:
1: Determine
Determine the the ratio
ratio of
of
cost
cost to
to the
the retail
retail price.
price.
 Retail
Retail Inventory
Inventory Method
Method
Cost Retail
Merchandise inventory, Jan. 1 $19,400 $ 36,000
Purchases in January (net) 42,600 64,000
Merchandise available for sale $62,000 $100,000
Sales for January (net) 70,000
Merchandise inventory, January 31, at retail $ 30,000

Step
Step 2:
2: Determine
Determine the
the ending
ending
inventory
inventory at
at retail.
retail.
 Retail
Retail Inventory
Inventory Method
Method
Cost Retail
Merchandise inventory, Jan. 1 $19,400 $ 36,000
Purchases in January (net) 42,600 64,000
Merchandise available for sale $62,000 $100,000
Sales for January (net) 70,000
Merchandise inventory, January 31, at retail $ 30,000
Merchandise inventory, January 31, at cost
($30,000 x 62%) $18,600

Step
Step 3:
3: Calculate
Calculate the
the estimated
estimated
inventory
inventory at
at cost.
cost.
 Gross Profit Method of Estimating
Inventory Cost
1. A gross profit percentage rate is estimated based on previous
experience adjusted for known changes.
2. Estimated gross profit is calculated by multiplying the estimated
gross profit rate times the actual net sales.
3. Estimated cost of merchandise sold is calculated by subtracting
the gross profit from actual sales.
4. The cost of merchandise sold estimate is deducted from actual
merchandise available for sale to determine the estimated cost
of merchandise inventory.
 Gross
Gross Profit
Profit Method
Method
Merchandise inventory, January 1 $ 57,000
Purchases in January (net) 180,000
Merchandise available for sale $237,000
Sales in January (net) $250,000
Less: Estimated gross profit
($250,000 x 30%) 75,000
Estimated cost of merchandise sold 175,000
Estimated merchandise inventory, January 31 $ 62,000

The
The gross
gross profit
profit method
method isis useful
useful for
for estimating
estimating
inventories
inventories for
for monthly
monthly oror quarterly
quarterly financial
financial
statements
statements in
in aa periodic
periodic inventory
inventory system.
system.
 Inventory
Inventory Turnover
Turnover
SUPERVALU Zale
Cost of merchandise sold $15,620,127,000 $ 737,188,000
Inventories:
Beginning of year $1,115,529,000 $478,467,000
End of year 1,067,837,000 571,669,000
Total $2,183,366,000 $1,050,136,000
Average $1,091,683,000 $525,068,000
Inventory turnover 14.3 times 1.4 times

Use:
Use: Inventory
Inventory turnover
turnover measures
measures the
the relationship
relationship
between
between the
the volume
volume of
of goods
goods sold
sold and
and the
the
amount
amount of
of inventory
inventory carried
carried during
during the
the period.
period.
Number
Number of
of Days’
Days’ Sales
Sales in
in Inventory
Inventory
SUPERVALU Zale
Average daily cost of
merchandise sold:
$15,620,127,000/365 $42,794,868
$737,188,000/365 $2,019,693
Ending inventory $1,067,837,000 $571,669,000

Average selling period 25 days 283 days

Use:
Use: To
To assess
assess the
the efficiency
efficiency in
in the
the
management
management of of inventory
inventory
Chapter 9

The
The End
End