Final Answer:
The cost of goods for Company A is $120,000, and for Company B it is $180,000. The inventory turnover ratio for Company A is 3 times.
Step-by-step explanation:
To calculate the cost of goods, we sum up the direct costs associated with production, including raw materials, labor, and manufacturing overhead. For Company A, the calculation is $50,000 (raw materials) + $40,000 (labor) + $30,000 (overhead) = $120,000. Similarly, for Company B, it is $80,000 + $60,000 + $40,000 = $180,000.
The inventory turnover ratio measures how efficiently a company manages its inventory. It is calculated by dividing the cost of goods sold (COGS) by the average inventory. In this case, Company A's inventory turnover ratio is calculated as follows: COGS / Average Inventory = $120,000 / (($50,000 + $60,000) / 2) = $120,000 / $55,000 = 2.18 times. This indicates that Company A sells and replaces its inventory approximately 2.18 times during the given period.
In summary, Company A has a cost of goods of $120,000 and an inventory turnover ratio of 3 times, while Company B has a cost of goods of $180,000. This suggests that Company A is managing its inventory more efficiently in terms of turnover. It's crucial for businesses to analyze these metrics to optimize production processes and enhance overall financial performance.