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Question 335 - CSCP discussion

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Which of the following metrics compares the cost of goods sold (COGS) for a period to the average inventory cost for a period?

A.
Total cost per unit
Answers
A.
Total cost per unit
B.
Inventory turnover
Answers
B.
Inventory turnover
C.
Actual versus budget cost
Answers
C.
Actual versus budget cost
D.
Carrying costs
Answers
D.
Carrying costs
Suggested answer: B

Explanation:

Inventory turnover is a key performance metric in supply chain management that compares the cost of goods sold (COGS) during a period to the average inventory cost for the same period. It measures how many times a company's inventory is sold and replaced over a period.

Calculation: Inventory Turnover = COGS / Average Inventory

Importance: High inventory turnover indicates efficient inventory management, suggesting that goods are sold quickly and not sitting in storage.

Average Inventory: Calculated as (Beginning Inventory + Ending Inventory) / 2.

Application: Helps in assessing the liquidity of inventory, efficiency in managing stock, and effectiveness in sales strategies.

'Principles of Inventory Management: When You Are Down to Four, Order More' by John A. Muckstadt

APICS Dictionary

asked 16/09/2024
himanshu deshpande
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