Question

Exercise 6-12 a The following information is available for Bridgeport Corp. for three recent fiscal years. 2022 2021 2020 Inventory $550,000 $566,000 $346,000 Net sales 1,860,000 1,800,000 1,365,000 Cost of goods sold 1,116,000 957,600 948,000 (a) Calculate the inventory turnover, days in inventory, and gross profit rate for 2022 and 2021. (Round inventory turnover to 1 decimal place, e.g. 5.2, days in inventory to 0 decimal places, e.g. 125 and gross profit rate to 1 decimal place, e.g. 5.2%.)

Answer 1

The inventory turnover for 2022 is 2.03 and for 2021 is 1.72. The days in inventory for 2022 is 179.8 and for 2021 is 212.2. The gross profit rate for 2022 is 40% and for 2021 is 46.8%.

Step-by-step explanation:

To calculate the inventory turnover, divide the cost of goods sold by the average inventory. In 2022, the cost of goods sold is $1,116,000 and the average inventory is $550,000. So the inventory turnover for 2022 is 2.03. In 2021, the cost of goods sold is $957,600 and the average inventory is $558,000. So the inventory turnover for 2021 is 1.72.

To calculate the days in inventory, divide 365 by the inventory turnover. In 2022, the days in inventory is 179.8. In 2021, the days in inventory is 212.2.

To calculate the gross profit rate, divide the gross profit by the net sales. In 2022, the gross profit is $744,000 and the net sales is $1,860,000. So the gross profit rate for 2022 is 40%. In 2021, the gross profit is $842,400 and the net sales is $1,800,000. So the gross profit rate for 2021 is 46.8%.

Answer 2

2022

TO: 3.3333

Days Outstanding: 110

Gross profit margin: 40%

2021

TO: 3.947368

Days Outstanding: 92.47

Gross profit margin: 46.8%

Step-by-step explanation:

2022

`(Sales)/(Average Inventory) = $Inventory Turnover`

​where:

`$$Average Inventory=(Beginning Inventory + Ending Inventory)/2`

Sales 1860000

Average Inventory: (550,000 + 566,000)/2 = 558,000

`(1,860,000)/(558,000) = $Inventory Turnover`

Inventory TO 3.333333333

Days outstanding:

`(365)/(Inventory TO) = $Days on Inventory`

`(365)/(3.33333333333333) = $Days on Inventory`

Days on Inventory 110

Gross Profit Margin:

`(gross \: profit)/(sales)`

(1,860,000 - 1,116,000)/1,860,000 = 0.40 = 40%

2021

`(Sales)/(Average Inventory) = $Inventory Turnover`

​where:

`$$Average Inventory=(Beginning Inventory + Ending Inventory)/2`

Sales 1,800,000

Average Inventory: (566,000 + 346,000)/2 = 456,000

`(1,800,000)/(456,000) = $Inventory Turnover`

Inventory TO 3.947368

Days outstanding:

`(365)/(Inventory TO) = $Days on Inventory`

`(365)/(3.947368) = $Days on Inventory`

Days on Inventory 92.47

Gross Profit Margin:

`(gross \: profit)/(sales)`

(1,800,000 - 957,600)/1,800,000 = 0.468 = 46.8%