Using the information below, compute the raw materials inventory turnover:

a. Raw Materials Used $ 104,500 Beginning

b. Raw Materials Inventory 9,900 Ending

c. Raw Materials Inventory 12,800

The raw material inventory turnover is 9.2 times or 40 days

Explanation:

This problem requires us to compute raw material inventory turnover. The inventory turnover ratio is calculated by dividing the inventory used for a period by the average inventory for that period. Average inventory is used instead of ending inventory because many companies' merchandise fluctuates greatly throughout the year.

So RM inventory turnover = RM used/Average inventory

= 104,600/11,350*

= 9.2 times or 40 days**

* Average inventory = (9,900 + 12,800) / 2

* * (365/9.2) = 40 days