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Bizsupply, a manufacturer of office supplies, ended the current year with annual sales (at cost) of $68 million. During the year, the inventory of accessories turned over eight times. For the next year, Bizsupply plans to increase annual sales (at cost) by 25%. What inventory turns must Bizsupply achieve if, through better supply chain management, it wants to support next year's sales with no increase in the average aggregate inventory value?

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Cricetusidn

Answer:

the inventory turns will be "10". A further explanation is given below.

Explanation:

The given values are:

Annual sales,

= $68

Number of inventory turns,

= 8

Increase annual sales,

= 25%

Now,

The average inventory will be:

= [tex]\frac{Annual \ sales}{Number \ of \ inventory \ turns}[/tex]

On substituting the given values, we get

= [tex]\frac{68}{8}[/tex]

= [tex]8.5 \ million[/tex]

The projected annual sales will be:

= [tex]68\times 1.25[/tex]

= [tex]85[/tex]

then,

The revised inventory turns will be:

= [tex]\frac{Project \ annual \ sales}{Average \ inventory}[/tex]

= [tex]\frac{85}{8.5}[/tex]

= [tex]10[/tex]

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