Inventory Analysis The following account balances are taken from the records of Lewis Inc., a wholesaler of fresh fruits and vegetables:

December 31 2010 2009 2008 Merchandise inventory $ 200,000 $ 150,000 $120,000 2010 2009 Cost of goods sold $7,100,000 $8,100,000 Required 1. Compute Lewis’s inventory turnover ratio for 2010 and 2009.

2. Compute the number of days’ sales in inventory for 2010 and 2009. Assume 360 days in a year.

3. Comment on your answers in (1) and (2) relative to the company’s management of inventory over the two years. What problems do you see in its inventory management?

AppendixLO1