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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


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.





Global Co.




Cosmos Co.




SunStar Co.




Galaxy Co.






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


  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

What is the anwer of 1st que ?

Dear Students Don’t wait for solution post your problems here and discuss ... after discussion a perfect solution will come in a result. So, Start it now, replies here give your comments according to your knowledge and understandings....

1st Q or 3rd Q ka Answer please share ker dain/??? Zubair bro can your tell me what is the riight answer

Complete GDB

A)Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced over a period. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days."

Generally it is calculated as:

Inventory Turnover = Sales / Inventory

However, it may also be calculated as:

Inventory Turnover = Cost of Goods Sold / Average Inventory

Part b

Cost of goods manufactured

(Opening inventory + closing inventory)



(30,000 + 41,000)


= 7.35 answer

Part C: A two company’s compere easy to inventory the answer must be in the business industry.

part a ka koi bilkul accurate ans bta day ya ...guide kar day us say mutaliq 

pl someone share complete solution, am not getting it

Idea Solution of MGT402 GBD #1.

A) very high ratio could result in lost sales, as there is not enough inventories to meet demand.

B) Inventory turnover ratio

Inventory turnover ratio = Cost of goods sold/ Average inventory

Average inventory = Opening Inventory + Closing Inventory / 2

Average inventory = 30,000 + 41,000/ 2

= 71, 000/ 2

= 35,500

Inventory turnover ratio = 261,000/ 35,500

Inventory turnover ratio = 7.35 times. 

This ratio is expressed in times. It shows that, for how many time the inventory is turning over towards cost of goods sold.

C) The inventory turnover ratio of Global Company cannot be compare with Sun Star and Galaxy Company due to the low inventory turnover ratio.

how can you use  CGM/Average Inventory

you must use GGS/Average inventory

In part (b). 261,000 tu cost of good manufactured hai but ap na usy cost of good sold ke jaga put kiya.Can u plz explain why?

Bint e ahmed ....cost of good sold find karna given information say ......cost of good manufactured ko put nahin part b mein 

cost of good kaisy find ho gae?


A very High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall


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