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  3. f. inventory turnover is cost of sales divided by

f. Inventory turnover is cost of sales divided by average inventory. Cost of sales...

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Accounting

f. Inventory turnover is cost of sales divided by average inventory.
Cost of sales
2013$528,0432012$585,897
Average Inventories, net
211,734
211,734
Inventory turnover ratio
2.22 times
2.63 times
g. Inventory holding period =365 days/inventory turnover ratio:
2013:3652.22=164 days. 2012:3652.63=139 days.
The inventory turnover ratio has decreased from 2012 to 2013 and the inventory holding period increased suggesting that Callaway manage its inventories less efficiently in 2013 than it did in 2012. Callawa experienced an increase in average inventory (by approximately 7%) i 2013 while cost of sales declined in the same period (by approximatel 10%. Callaway could have experienced a decline in demand near the er of the year that caused year-end inventories to increase. alternative explanation could be that Callaway is deliberate stocking more inventory of finished goods and raw material anticipation of increased future sales. Callaway's sales during 20 increased from 2012 after a number of years of declines suggest that the second explanation may be plausible.
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