Beachwood Foods is a grocery store company located in Florida with more than 100 stores in the state. Financial information for scale 2012 and 2011 follows.
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An excerpt from management discussion and analysis (MD&A) in the scale 2012 annual report stated: Gross margin as a percent of sales was 28.0 percent in scale 2012, down from 30.1 percent and 31.2 percent in scale 2011 and 2010.The declining gross margin percentages reflect the increase in nongrocery items. Nongrocery items, which have been expanded at many of our store locations, have lower margins than grocery items sales.
Required:
a. Compute the gross margin percentage for both years.
b. Based on your evaluation of the change in the gross margin percentage and the discussion in the MD&A, comment on how well the company has managed its gross margin.
c. Compute inventory turnover and days sales in inventory for both years.
d. Based on your analysis in part c, briefly comment on how well the company has controlled its investment in inventory.