Problem: The Marlin Company operates 50 weeks a year, and its cost of goods sold last year was $1,500,000. The firm carries six items in inventory: three raw materials, two work-in-process items, and one finished good. The following table shows the company’s last year’s average inventory levels for these items, along with their unit values.
|
Category
|
Part Number
|
Average Inventory
Units
|
Value per Unit
|
|
|
RM-1
|
1750
|
S15
|
|
Raw Materials
|
RM-2
|
1500
|
S25
|
|
|
RBI-3
|
2000
|
S30
|
|
|
WIP-1
|
1500
|
S40
|
|
Work-in-process
|
|
|
|
|
|
WIP-2
|
1300
|
S50
|
|
Finished Goods
|
FG-1
|
1000
|
S90
|
Q1. What is their average aggregate inventory value?
Q2. How many weeks of supply does the firm have?
Q3. What was their inventory turnover last year?
Q4. The turnover ratio is widely used because it is a common measure that links to the financial statements of the firm. Discuss the benefits and drawbacks of using this measure.