Company S Cost Goods Sold Cogs 4th Quarter 2018 2 500 000 October 1st Company Held 1 000 0 Q34232985

A company’s Cost of Goods Sold (COGS) for the 4th quarter of2018 was $2,500,000. On October 1st the company held $1,000,000 ininventory and on December 31st it held $920,000. Assume thatquarterly COGS were projected to stay constant (i.e. $2,500,000every quarter)through the first 2 quarters of 2019. and that thecompany wanted to turn its inventory once a month in 2019 (i.e. get6 turns in the 1st 2 quarters of 2019). What would its endinginventory on June 30th need to be to achieve this?

Expert Answer

Inventory turnover ratio = Cost of goods sold / Averageinventory (Main formula)

Initial inventory on 1st October= $1000000

Quarterly