The managerial accountant at Midlothian Manufacturing recently implemented JIT and she wants to compare the financial performance measure before she implemented JIT. The inventory turnover ratio prior to implementing JIT was 2.5
After JIT, cost of goods sold was $500,000,000 and the average inventory was $1,900,000. What was the inventory turnover ratio at Midlothian Manufacturing?
Midlothian Manufacturing
Cost of goods sold $500,000,000
Average inventory $1,900,000
Required:
Compute the inventory ratio turnover at Midlothian Manufacturing. Was the decision to implement JIT effective?
A) 1.4; decrease
B) 2.5; no change
C) 3.1; increase
D) 3.9; increase
E) 4.96; increase
E
Explanation: E) [($500,000,000 / $100,900,000 )] = 4.96 (rounded)
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