Question

A manufacturing company producing medical devices reported $108,000,000 in sales over the last year. At the end of the same year, the company had $48,000,000 worth of inventory of ready-to-ship devices. a. Assuming that units in inventory are valued (based on COGS) at $1,200 per unit and are sold for $2,400 per unit, what are the annual inventory turns? The company uses a 21 percent per year cost of inventory. That is, for the hypothetical case that one unit of $1,200 would sit exactly one year in inventory, the company charges its operations division a $250 inventory cost. (Round the answer to 2 decimal places.) . What is the per unit inventory cost in $ for a product that costs $1,200? (Round the answer to 2 decimal places.)

Answer 1

1. Assuming that units in inventory are valued (based on COGS) at $1,200 per unit and are sold for $2,400 per unit, what are the annual inventory turns? The company uses a 21 percent per year cost of inventory. That is, for the hypothetical case that one unit of $1,200 would sit exactly one year in inventory, the company charges its operations division a $250 inventory cost.

A manufacturing company producing medical devices reported $108,000,000 in sales over the last year

It is sold for $2,400 per unit

Therefore, number of units sold = Sales / selling price per unit

= $108,000,000 /$2,400

= 45,000 units

At $1,200 per unit cost of goods sold

Total cost of goods sold = total number of units sold * per unit cost of goods sold

= 45,000 * $1,200 = $54,000,000

At the end of the same year, the company had $48,000,000 worth of inventory of ready-to-ship devices

Assuming that units in inventory are valued (based on COGS) at $1,200 per unit

Therefore number of units in inventory = total inventory / per unit value of inventory

= $48,000,000 / $1,200

= 40,000 units

Annual inventory turns = Total Cost of goods sold (GOGS) / Inventory

=$54,000,000 / $48,000,000 = 1.125 or 1.13 turns

2. What is the per unit inventory cost in $ for a product that costs $1,200?

Total inventory cost for one turn = Inventory cost per unit * 21%

= $1,200 * 21% = $252 per unit

The per unit inventory cost = Total inventory cost for one turn/ Annual inventory turns

= $252 / 1.125 = $224.00

The per unit inventory cost is $224.00