Question

The burger joint at SDSU sells an average of 6000 third-pound hamburgers each week. Hamburger patties are resupplied twice a week, and on average the store has 450 pounds of hamburger in stock. Assume that hamburger costs $1.50 a pound. What is the inventory turnover for the hamburger patties?

Answer 1

Answer:

13.3 times per week

Explanation:

Inventory turnover helps to show how efficiently a company manages its inventory by comparing the cost of goods sold and the average inventory for a particular period. In other words, it measures how many times a company sold its total average inventory amount during a particular period. In this case, one week. This is an important assessment to ensure two things:

1. Inventory meets sales adequately and sales will not be affected by not having enough inventory.

2. Too much inventory is not held at one point, which would incur high storage and holding costs, and also wastage in terms of perishable inventory such as hamburger patties.

It is calculated as cost of goods sold / average inventory.

In this case, 6000 third - pound hamburgers are sold each week, with it costing $1.5 per pound.

6000 x 1/3 = 2000 pounds

2000 pounds x $1.5 = $3000 COGS per week.

Since average inventory is 450 pounds for two weeks, it would be 225 per week.

Hence, inventory turnover =

$3000 / 225 = 13.3 times per week