Analyzing Inventory}

The recent financial statements of Tunis Clothing Ltd. include the following data.

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1. Calculate Tunis's gross profit ratio (rounded to two decimal places), inventory turnover ratio (rounded to three decimal places), and the average days to sell inventory (assume a 365-day year and round to two decimal places) using the FIFO inventory costing method. Be sure to explain what each ratio means.
2. Calculate Tunis's gross profit ratio (rounded to two decimal places), inventory turnover ratio (rounded to three decimal places), and the average days to sell inventory (assume a 365day year and round to two decimal places) using the weighted average inventory costing method. Be sure to explain what each ratio means.
3. CONCEPTUAL CONNECTION Which ratios - the ones computed using FIFO or weighted average inventory values - provide the better indicator of how successful Tunis was at managing and controlling its inventory?
Exercise

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Sales $754,690 Cost of goods sold: Computed under FIFO 528,600 Computed under weighted average 555,000 Average inventory: Computed under FIFO 72,200 Computed under weighted average 45,800