Wilkins Manufacturing has annual sales of $4 million and a gross profit margin of 40%. Its end-of-quarter inventories are
Quarter Inventory
1 ........ $ 400,000
2 ........ 800,000
3 ........ 1,200,000
4 ........ 200,000
a. Find the average quarterly inventory and use it to calculate the firm’s inventory turnover and the average age of inventory.
b. Assuming that the company is in an industry with an average inventory turnover of 2.0, how would you evaluate the activity of Wilkins’ inventory?