Norton Industries recorded total cost of goods sold for 20X2 of $6.5 million. Norton had the following inventory balances for the months indicated (end of period balances):
|
|
In Millions
|
|
In Millions
|
|
December 20X1
|
$1.20
|
July 20X2
|
$1.81
|
|
January 20X2
|
1.65
|
August 20X2
|
1.78
|
|
February 20X2
|
1.70
|
September 20X2
|
1.26
|
|
March 20X2
|
1.38
|
October 20X2
|
1.61
|
|
April 20X2
|
1.66
|
November 20X2
|
1.63
|
|
May 20X2
|
1.93
|
December 20X2
|
1.19
|
|
June 20X2
|
1.41
|
|
|
a. Compute inventory turnover for Norton using the following methods to calcu- late the inventory figure:
1. End of year
2. Average of the beginning and end of year
3. Average of the ends of quarters (use the five quarter ends)
4. Average of the ends of months (use the 13 month ends)
b. Which method provides the most accurate picture of Norton's inventory management? Why?
c. Which method do you think Norton is currently using? Why?