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# Cost and management accounting (mgt 402).........Start date : 12 may 2016.........End date : 18 may 2016 )...Marks 10

Cost & Management Accounting (MGT402)

GDB # 01

Total Marks: 10

Case:

Following are the inventory turnover ratios of Global Company, Cosmos Company, SunStar Company and Galaxy Company for the financial year 2010, 2011 and 2012. SunStar and Galaxy Company manufacture heavy machinery whereas Global and Cosmos Company are retailers of general merchandise.

 Company FY-2010 FY-2011 FY-2012 Global Co. ? 6.78 6.81 Cosmos Co. 11.34 10.97 10.74 SunStar Co. 1.83 1.59 1.9 Galaxy Co. 3.97 3.78 4.12

Financial information of Global Company for financial year 2010 is as follows:

• Opening inventories-----------------Rs.  30,000
• Closing inventories------------------Rs.  41,000
• Cost of goods manufactured-------Rs. 261,000

Required:

1. In general, higher inventory turnover ratio indicates efficient operations carried out by an organization but a very high ratio is not considered good. Why is it so?
2. Calculate the missing figure for inventory turnover ratio of Global Company for year 2010 with the help of given data?
3. Can we compare inventory turnover ratio of Global Company with that of SunStar and Galaxy Company? Justify your answer with logical argument.

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### Replies to This Discussion

Friends share your thoughts and ideas for this gdb ...thanks

Friends share your thoughts and ideas for this gdb ...thanks

For Part B the formula will be :

Inventory Turnover Ratio = Cost of Goods Sold / (opening + closing inventory)/2

Please share for Part A and C.

EJAZ WHY YOU DIVIDED THIS BY 2? CAN YOU EXPLAIN .........

Divided by 2 because we have 2 inventories (1) Opening (2) Closing, so to take the average should be divided by total numbers and here we have 2 inventories.

div by 2 pr avg aye gi

ہاں جی میرے بھائی ، ایوریج یعنی اوسط لینے کے لئے کل تعداد سے تقسیم کرنا ہوتا ہے۔ اور اس وقت ہمارے پاس دو ہی انونٹریز ہیں، ہہلی اوپننگ اور دوسری کلوزنگ۔ تو دونوں کے مجموعہ کو دو پر تقسیم یعنی ڈیوائیڈ کریں۔

gud ejaz you are absolutely right ....plz ab A or c ko bi find karo yar ....main bi koshih kar raha hoon

Average inventory=opening +closing /2

cost of goods sold kis trah ai ga

Inventory Turnover Ratio = Cost of Goods Sold / (opening + closing inventory)/100 A ka ye ho ga phir???

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