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Jasper Furnishings has $300 million in sales. The company expects that its sales will increase 12% this year. Jasper's CFO uses a simple linear regression to forecast the company's inventory level for a given level of projected sales. On the basis of recent history, the estimated relationship between inventories and sales (in millions of dollars) is as follows:

Inventories=$25+0.125(Sales).

Given the estimated sales forecast and the estimated relationship between inventories and sales, what are your forecasts of the company’s year-end inventory level and its inventory turnover ratio?

Respuesta :

Tundexi

Answer:

Sales = $300,000,000

Sales Increase = 12%

Inventories = $25 + 0.125 (Sales)

Forecast sales = $300,000,000 * 1.12 = $336,000,000

As per equation inventory level = $25 + 0.125 (Sales)

= $25 + 0.125 ($336,000,000/1,000,000)

= $25 + $42

= $67 million

Inventory turnover ratio = Sales / Inventory

Inventory turnover ratio = $336,000,000/$67,000,000

Inventory turnover ratio = 5.014925373134328

Inventory turnover ratio = 5.015

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