The buyer of women's gloves currently has an average inventory of $20500, with an annual turnover rate of 4

Math Sep 09, 2020

The buyer of women's gloves currently has an average inventory of $20500, with an annual turnover rate of 4.0. Because this rate of stock turn is below the industry average, a 7.82% increase in turnover is sought. Assuming a constant level of inventory, calculate the percentage increase in sales necessary to produce a 7.82% increase in turnover.

Expert Solution

Inventory turnover ratio = Sales/Inventories
4.0 = Sales/20,500
Sales = 82,000

You need to calculate the new turnover which is increased by 7.82%.
4.0 x 1.0782 = 4.3128

Inventory turnover ratio = Sales/Inventories
4.3128 = Sales/20,500
Sales = 88,412.40

Then, you need to find the percentage increase in sales as follows: -

88,412.40 - 82,000 x 100 = 7.82%
82,000

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