The company's inventory manager receives compensation that includes a bonus based on gross profit. You discover that the inventory manager has knowingly overstated ending inventory by $2 million. What effect does this error have on the financial statements of the company and specifically gross profit? Why would the manager knowingly overstate ending inventory? Would this be considered an ethics violation?A company reported the following data:Calculate the company's merchandise inventory turnover for each year.Comment on the company's efficiency in managing its inventory.

a)The company's inventory manager receives compensationthat includes a bonus based on gross profit. You discover that the inventorymanager has knowingly overstated ending inventory by $2 million. What effectdoes this error have on the financial statements of the company andspecifically gross profit? Why would the manager knowingly overstate endinginventory? Would this be considered an ethics violation?

b)A company reported the following data:

	Year 1	Year 2
Cost of goods sold	$317,500	$279,100
Average inventory	72,000	93,000

Required:

1.Calculate the company's merchandise inventoryturnover for each year.

2.Comment on the company's efficiency in managingits inventory.