Problem 3-14

Norton Industries recorded total cost of goods sold for 20X2 of $6.8 million. Norton had the following inventory balances for the months indicated (end of period balances):

	In Millions
December, 20X1	$1.15
January, 20X2	1.65
February, 20X2	1.70
March, 20X2	1.43
April, 20X2	1.66
May, 20X2	1.93
June, 20X2	1.38
July, 20X2	1.81
August, 20X2	1.78
September, 20X2	1.27
October, 20X2	1.61
November, 20X2	1.63
December, 20X2	1.13

1. Compute inventory turnover for Norton using different methods to calculate the inventory figure. Round your answers to 2 decimal places.
   1. End of year fill in the blank 1x
   2. Average of the beginning and end of year fill in the blank 2x
   3. Average of the ends of quarters (use the five quarter ends) fill in the blank 3x
   4. Average of the ends of months (use the 13 month ends) fill in the blank 4x
2. Which method provides the most accurate picture of Norton's inventory management? Average of the ends of months
3. Which method do you think Norton is currently using? (Hint: See Limitations and Weaknesses of Ratio Analysis.) Average of the ends of quarters

Why?

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