Question

Nestlé reports beginning raw materials inventory of 3,815 and ending raw materials inventory of 3,499 (both numbers in millions of Swiss francs). Assume Nestlé purchased 13,860 and used 14,176 (both amounts in millions of Swiss francs) in raw materials during the year. Compute raw materials inventory turnover and the number of days’ sales in raw materials inventory.

Answer 1

Answer:

3.88 times; 90 days

Explanation:

Given that,

Beginning raw materials inventory = 3,815

Ending raw materials inventory = 3,499

Raw materials purchased = 13,860

Raw materials used = 14,176

Average inventory:

= (Beginning raw materials + Ending raw materials) ÷ 2

= (3,815 + 3,499) ÷ 2

= 7,314 ÷ 2

= 3,657

Raw material inventory turnover:

= Raw material used ÷ Average inventory

= 14,176 ÷ 3,657

= 3.88 times

Days sales in inventory:

= (Ending inventory ÷ Raw material used) × 365 days

= (3,499 ÷ 14,176) × 365 days

= 90 (Approx)