A manufacturing company producing medical devices reported $40,000,000 in sales over the last year. At the end of the same year, the company had $10,000,000 worth of inventory of ready-to-ship devices.
a) Assuming that units in inventory are valued (based on COGS) at $500 per unit and are sold at $800, how fast does the company turn its inventory?
b) The company used a 20 percent per year cost of inventory. That is, for the hypothetical case that one unit of $500 would sit exactly one year in inventory, the company charges its operations division a $100 inventory cost. Based on the inventory turn you obtained in a), what - in absolute terms - is the per unit inventory cost for the product of the company?