1. A manufacturer reported an inventory turnover ratio of 8.6 during 2010. During 2011, management introduced a new inventory control system that was expected to reduce average inventory levels by 25 percent without affecting sales volume. Given these circumstances, would you expect the inventory turnover ratio to increase or decrease during 2011? Explain.

2. Lexis Corporation is considering changing its inventory method from FIFO to weighted average and wants to determine the impact on selected accounting ratios. In general, what would be the impact of this change on the following ratios, assuming that prices have been increasing over time: profit margin, fixed asset turnover, current ratio, and quick ratio?