Click to edit Master title style. Inventories

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1 1 7 Inventories 1

2 2 After studying this chapter, you should be able to: 1. Describe the importance of control over inventory. 2. Describe three inventory cost flow assumptions and how they impact the income statement and balance sheet. 2

3 3 After studying this chapter, you should be able to: 3. Determine the cost of inventory under the perpetual system, using the FIFO, LIFO, and average cost methods. 4. Determine the cost of inventory under the periodic system, using the FIFO, LIFO, and average cost methods. 5. Compare and contrast the use of the three inventory costing methods. 3

4 4 After studying this chapter, you should be able to: 6. Describe and illustrate the reporting of merchandise inventory in the financial statement. 7. Estimate the cost of inventory using the retail method and the gross profit method. 4

5 5 7-1 Objective 1 Describe the importance of control over inventory. 5

6 6 7-1 Two primary objectives of control over inventory are: 1) Safeguarding the inventory, and 2) Properly reporting it in the financial statements. 6

7 7 7-1 Controls over inventory include developing and using security measures to prevent inventory damage or customer or employee theft. 7

8 8 7-1 To ensure the accuracy of the amount of inventory reported in the financial statements, a merchandising business should take a physical inventory. 8

9 9 7-2 Objective 2 Describe three inventory cost flow assumptions and how they impact the income statement and balance sheet. 9

10 10 Inventory Costing Methods

11 (Continued) 11

12 (Continued) 12

13 (Concluded) 13

14 14 Inventory Costing Methods In Indonesia FIFO Average Specific Indentification 14

15 15 Inventory Costing Methods In USA Number of firms (> $1B Sales) FIFO LIFO Average cost 15 14

16 16 Example Exercise 7-1 The three identical units of Item QBM are purchased during February, as shown below. Item QBM Units Cost Feb. 8 Purchase 1 Rp45, Purchase 1 48, Purchase 1 51,000 Total 3 Rp144,000 Average cost per unit Rp48,000 (Rp144,000 3 units) Assume that one unit is sold on February 27 for Rp70, Determine the gross profit for February and ending inventory on February 28 using (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) average cost methods

17 Follow My Example 7-1 Gross Profit Ending Inventory (a) First-in, first-out (FIFO): Rp25,000 (Rp70,000 Rp45,000) Rp99,000 (Rp48,000 Rp51,000) (b) Last-in, first-out (LIFO): Rp19,000 (Rp70,000 Rp51,000) Rp93,000 (Rp45,000 + Rp48,000) (c) Average cost: Rp22,000 (Rp70,000 Rp48,000) Rp96,000 (Rp48,000 x 2) $144/3 units For Practice: PE 7-1A, PE 7-1B 17 16

18 Objective 3 Determine the cost of inventory under the perpetual inventory system, using FIFO, LIFO, and average cost methods. 18

19 19 FIFO Perpetual 7-3 On January 1, the firm had 100 units of Item 127B that cost Rp20,000 per unit. Item 127B Units Cost Jan. 1 Inventory 100 Rp20,

20 20 FIFO Perpetual 7-3 On January 4, the firm sold 70 units of 127B at Rp30,000 each. Item 127B Units Cost Jan. 1 Inventory 100 Rp20,000 4 Sale

21 21 FIFO Perpetual 7-3 On January 4, the firm sold 70 units of 127B at Rp30,000 each. 4 Accounts Receivable Sales On 4 January Cost of Merchandise 22, the Sold firm sold 1 twenty units at $30. Merchandise Inventory

22 22 FIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , The cost was in Rp

23 23 FIFO Perpetual 7-3 On January 10, the firm purchased 80 units at Rp21,000 each. Item 127B Units Cost Jan. 1 Inventory 100 Rp20,000 4 Sale Purchase 80 21,

24 24 FIFO Perpetual 7-3 On January 10, the firm purchased 80 units at Rp21,000 each. 10 Merchandise Inventory Accounts Payable

25 25 FIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , ,680 The cost was in Rp

26 26 FIFO Perpetual On January 22, the firm sold 40 units for Rp30,000 each. 7-3 Item 127B Units Cost Jan. 1 Inventory 100 Rp20,000 4 Sale Purchase 80 21, Sale

27 27 FIFO Perpetual On January 22, the firm sold 40 units for Rp30,000 each Accounts Receivable Sales On 22 January Cost of Merchandise 22, the Sold firm sold twenty units at $30. Merchandise Inventory

28 28 FIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , , ,470 Of the forty sold, thirty are considered to be from those acquired at Rp20,000 each. The other ten are considered to be from the January 10 purchase. The cost was in Rp

29 29 FIFO Perpetual 7-3 On January 28, the firm sold 20 units at Rp30,000 each. Item 127B Units Cost Jan. 1 Inventory 100 Rp20,000 4 Sale Purchase 80 21, Sale Sale

30 30 FIFO Perpetual 7-3 On January 28, the firm sold 20 units at Rp30,000 each. 28 Accounts Receivable Sales Cost of Merchandise Sold Merchandise Inventory

31 31 FIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , , , ,050 Unit Cost and Total Cost is in Rp

32 32 FIFO Perpetual 7-3 On January 30, purchased ten additional units of Item 127B at Rp22,000 each. Item 127B Units Cost Jan. 1 Inventory 100 Rp20,000 4 Sale Purchase 80 21, Sale Sale Purchase ,

33 33 FIFO Perpetual 7-3 On January 30, purchased ten additional units of Item 127B at Rp22,000 each. 30 Merchandise Inventory Accounts Payable

34 34 FIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , , , , , , ,200 Unit Cost and Total Cost is in Rp

35 35 FIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , , , , , , ,200 Unit Cost and Total Cost is in Rp000 Cost of merchandise sold for January is Rp2,630,

36 36 FIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , , , , , , ,200 The cost was in Rp000 January 31, inventory is Rp3,250,000 (Rp1,050,000 + Rp2,200,000) 36 35

37 37 Example Exercise 7-2 Beginning inventory, purchases, and sales for Item ER27 are as follows: Nov. 1 Inventory 40 units at Rp5,000 5 Sale 32 units 11 Purchase 60 units at Rp7, Sale 45 units Assuming a perpetual inventory system and the first-in, first-out (FIFO) method, determine (a) the cost of the merchandise sold for the November 21 sale and (b) the inventory on November

38 Follow My Example 7-2 a) Cost of merchandise sold: 8 Rp5,000 Rp40, Rp7, , units Rp299,000 b) Inventory, November 30: Rp161,000 = (23 units x Rp7,000) For Practice: PE 7-2A, PE 7-2B 38 37

39 39 LIFO Perpetual 7-3 On January 1, the firm had 100 units of Item 127B that cost Rp20,000 per unit. Item 127B Units Cost Jan. 1 Inventory 100 Rp20,

40 40 LIFO Perpetual 7-3 On January 4, the firm sold 70 units of 127B at Rp30,000 each. Item 127B Units Cost Jan. 1 Inventory 100 Rp20,000 4 Sale

41 41 LIFO Perpetual 7-3 On January 4, the firm sold 70 units of 127B at Rp30,000 each. 4 Accounts Receivable Sales On 4 January Cost of Merchandise 22, the Sold firm sold twenty 000 units at $30. Merchandise Inventory

42 42 LIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , The unit cost and total cost is in Rp

43 43 LIFO Perpetual 7-3 On January 10, the firm purchased 80 units at Rp21,000 each. Item 127B Units Cost Jan. 1 Inventory 100 Rp20,000 4 Sale Purchase 80 21,

44 44 LIFO Perpetual 7-3 On January 10, the firm purchased 80 units at Rp21,000 each. 10 Merchandise Inventory Accounts Payable

45 45 LIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , ,680 The unit cost and total cost is in Rp

46 46 LIFO Perpetual On January 22, the firm sold 40 units for Rp30,000 each. 7-3 Item 127B Units Cost Jan. 1 Inventory 100 Rp20,000 4 Sale Purchase 80 21, Sale

47 47 LIFO Perpetual On January 22, the firm sold 40 units for Rp30,000 each Accounts Receivable Sales On 22 January Cost of Merchandise 22, the Sold firm sold twenty units at $30. Merchandise Inventory

48 48 LIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , , All of the 40 sold are considered to be from the January 10 purchase. The unit cost and total cost is in Rp

49 49 LIFO Perpetual 7-3 On January 28, the firm sold 20 units at Rp30,000 each. Item 127B Units Cost Jan. 1 Inventory 100 Rp20,000 4 Sale Purchase 80 21, Sale Sale

50 50 LIFO Perpetual 7-3 On January 28, the firm sold 20 units at Rp30,000 each. 28 Accounts Receivable Sales Cost of Merchandise Sold Merchandise Inventory

51 51 LIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , , The unit cost and total cost is in Rp000 All of the 20 sold are considered to be from the January 22 purchase

52 52 LIFO Perpetual 7-3 On January 30, the firm purchased one hundred additional units of Item 127B at Rp22,000 each. Item 127B Units Cost Jan. 1 Inventory 100 Rp20,000 4 Sale Purchase 80 21, Sale Sale Purchase ,

53 53 LIFO Perpetual 7-3 On January 30, the firm purchased one hundred additional units of Item 127B at Rp22,000 each. 30 Merchandise Inventory Accounts Payable

54 54 LIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , , , ,200 The unit cost and total cost is in Rp

55 55 LIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , , , ,200 Cost of merchandise sold The unit cost and total cost is in Rp000 Rp2,660,

56 56 LIFO Perpetual 7-3 Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan , , , , , ,200 January 31, inventory..rp3,220,000 The unit cost and total cost is in Rp

57 57 Example Exercise 7-3 Beginning inventory, purchases, and sales for Item ER27 are as follows: Nov. 1 Inventory 40 units at Rp5,000 5 Sale 32 units 11 Purchase 60 units at Rp7, Sale 45 units Assuming a perpetual inventory system and the last-in, first-out (LIFO) method, determine (a) the cost of the merchandise sold for the November 21 sale and (b) the inventory on November

58 Follow My Example 7-3 a) Cost of merchandise sold: Rp315,000 = (45 units x Rp7,000) b) Inventory, November 30: 8 Rp5,000 Rp 40, Rp7, , Rp145,000 For Practice: PE 7-3A, PE 7-3B 58 57

59 Objective 4 Determine the cost of inventory under the periodic inventory system, using FIFO, LIFO, and average cost methods. 59

60 60 FIFO Periodic 7-4 Using FIFO, the earliest batch purchased is considered the first batch of merchandise sold. The physical flow does not have to match the accounting method chosen. 60

61 61 FIFO Periodic 7-4 Jan. 1 Jan. 10 Jan Rp20, Rp21, Rp22,000 =Rp2,000,000 = 1,680,000 = 2,200, units available for sale during year Rp5,880,000 Cost of merchandise available for sale 61 60

62 62 FIFO Periodic 7-4 The physical count on January 31 shows that 150 units are on hand (conclusion: 130 units were sold). What is the cost of the ending inventory? Jan. 1 Jan. 10 Jan Sold units $20 Sold 30 of these 80 $21 50 Rp21, $ Rp22,000 = Rp 0 = 1,050,000 = 2,200,000 Ending inventory Rp3,250,

63 63 FIFO Periodic 7-4 Now we can calculate the cost of goods sold as follows: Beginning inventory, January 1 (Slide 60) Rp2,000,000 Purchases (Rp1,680,000 + Rp2,200,000) 3,880,000 Cost of merchandise available for sale Rp5,880,000 Ending inventory, January 31(Slide 61) 3,250,000 Cost of merchandise sold Rp2,630,

64 64 LIFO Periodic 7-4 Using LIFO, the most recent batch purchased is considered the first batch of merchandise sold. The actual flow of goods does not have to be LIFO. For example, a store selling fresh fish would want to sell the oldest fish first (which is FIFO) even though LIFO is used for accounting purposes. 64

65 65 LIFO Periodic 7-4 Jan. 1 Jan. 10 Jan Rp20, Rp21, Rp22,000 =Rp2,000,000 = 1,680,000 = 2,200, units available for sale during year Rp5,880,000 Cost of merchandise available for sale 65 64

66 66 LIFO Periodic 7-4 Assume again that the physical count on January 31 is 150 units (and that 130 units were sold). What is the cost of the ending inventory? Jan Rp20,000 =Rp2,000,000 Jan. 10 Jan Rp21, $21 Sold 30 of these 100 $22 = 1,050, Sold these = 2,2000 Ending inventory Rp3,050,

67 67 LIFO Periodic 7-4 Now we can calculate the cost of goods sold as follows: Beginning inventory, January 1 (Slide 64) Rp2,000,000 Purchases (Rp1,680,000 + Rp2,200,000) 3,880,000 Cost of merchandise available for sale Rp5,880,000 Ending inventory, January 31(Slide 65) 3,050,000 Cost of merchandise sold Rp2,830,

68 68 Average Cost 7-4 The weighted average unit cost method is based on the average cost of identical units. The total cost of merchandise available for sale is divided by the related number of units of that item. 68

69 69 Average Cost 7-4 Jan. 1 Jan. 10 Jan Rp20, Rp21, $ Rp22,000 =Rp2,000,000 = 1,680,000 = 2,200, Rp5,880,000 Average unit cost: Rp5,880, = Rp21,000 Cost of merchandise sold: 130 units at Rp21,000 = Rp2,730, Ending merchandise inventory: 150 units at Rp21,000= Rp3,150,000

70 70 Average Cost 7-4 Now we can calculate the cost of goods sold as follows: Beginning inventory, January 1 (Slide 68) Rp2,000,000 Purchases (Rp1,680,000 + Rp2,200,000) 3,880,000 Cost of merchandise available for sale Rp5,880,000 Ending inventory, January 31(Slide 68) 3,150,000 Cost of merchandise sold Rp2,730,

71 Example Exercise 7-4 The units of an item available for sale during the year were as follows: Jan. 1 Inventory 6 Rp50,000 Rp 300,000 Mar. 20 Purchase 14 Rp55, ,000 Oct. 30 Purchase 20 Rp62,000 1,240,000 Available for sale 40 units Rp 2,310,000 There are 16 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost by (a) the first-in, first-out (FIFO) method, (b) the last-in, first-out (LIFO) method, and (c) the average cost method

72 Follow My Example 7-4 a) First-in, first-out (FIFO) method: Rp992,000 (16 units x Rp62,000) b) Last-in, first-out (LIFO) method: Rp850,000 (6 units x Rp50,000) + (10 units x Rp55,000) c) Average method: Rp924,000 (16 units x Rp57,750) where average cost = Rp57,750 (Rp2,310, units) For Practice: PE 7-4A, PE 7-4B 72 71

73 Objective 5 Compare and contrast the use of the three inventory costing methods. 73

74 74 Partial Income Statements 7-5 First-In, First-Out Net sales Rp3,900,000 Cost of merchandise sold: Beginning inventory Rp2,000,000 Purchases 3,880,000 Merchandise available for sale Rp5,880,000 Less ending inventory 3,250,000 Cost of merchandise sold 2,630,000 Gross profit Rp1,270,

75 75 Partial Income Statements 7-5 Average Cost Net sales Rp3,900,000 Cost of merchandise sold: Beginning inventory Rp2,000,000 Purchases 3,880,000 Merchandise available for sale Rp5,880,000 Less ending inventory 3,150,000 Cost of merchandise sold 2,730,000 Gross profit Rp1,170,

76 76 Partial Income Statements 7-5 Last-In, First-Out Net sales Rp3,900,000 Cost of merchandise sold: Beginning inventory Rp2,000,000 Purchases 3,880,000 Merchandise available for sale Rp5,880,000 Less ending inventory 3,050,000 Cost of merchandise sold 2,830,000 Gross profit Rp1,070,

77 77 Recap 7-5 Weighted FIFO LIFO Average Ending inventory Rp3,250,000 Rp3,150,000 Rp3,050,000 Cost of merchandise sold Rp2,630,000 Rp2,730,000 Rp2,830,000 Gross profit Rp1,270,000 Rp1,170,000 Rp1,070,000 77

78 Objective 6 Describe and illustrate the reporting of merchandise inventory in the financial statements. 78

79 79 Lower-of-Cost-or-Market Method 7-6 If the cost of replacing an item in inventory is lower than the original purchase cost, the lower-of-cost-ormarket (LCM) method is used to value the inventory. 79

80 Market, as used in lower of cost or market, is the cost to replace the merchandise on the inventory date. 80

81 Cost and replacement cost can be determined for 1) each item in the inventory, 2) major classes or categories of inventory, or 3) the inventory as a whole. 81

82 82 Click to Determining edit Inventory Master at title style Lower-of-Cost-or-Market Method 7-6 A B C D E F G Unit Unit Total Inventory Cost Market Lower Commodity Quantity Price Price Cost Market of C or M 1 A 400 Rp10,250 Rp 9,500 Rp4,100,000 Rp3,800,000 Rp3,800, B ,500 24,100 2,700,000 2,892,000 2,700, C 600 8,000 7,750 4,800,000 4,650,000 4,650, D ,000 14,750 3,920,000 4,130,000 3,920, Total Rp15,520,000 Rp15,472,000 Rp15,070,

83 Merchandise that is out of date, spoiled, or damaged should be written down to its net realizable value. This is the estimated selling price less any direct cost of disposal, such as sales commissions. 83

84 84 Merchandise Inventory on the Balance Sheet 7-6 Merchandise inventory is usually presented in the Current Assets section of the balance sheet, following receivables. 84

85 The method of determining the cost of inventory (FIFO, LIFO, or weighted average) should be shown. 85

86 Example Exercise 7-5 On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item as shown in Exhibit 7. Inventory Unit Unit Commodity Quantity Cost Price Market Price C17Y 10 Rp 39,000 Rp 40,000 B563 7 Rp 110,000 98,

87 Follow My Example 7-5 Unit Unit Lower of Commodity Qty Cost Price Market Price Cost Market C or M C17Y 10 Rp 39,000 Rp 40,000 Rp 390,000 Rp 400,000 Rp 390,000 B ,000 98, , , ,000 Total Rp1,160,000 Rp1,086,000 Rp1,076,000 For Practice: PE 7-5A, PE 7-5B 87 86

88 Example Exercise 7-6 Agung Jaya Motor Shop incorrectly counted its December 31, 2008 inventory as Rp250,000,000 instead of the correct amount of Rp220,000,000. Indicate the effect of the misstatement on Agung Jaya Motor Shop December 31, 2008 balance sheet and income statement for the year ended December 31,

89 Follow My Example 7-6 Amount of Misstatement Overstatement (Understatement) Balance Sheet: Merchandise inventory overstated Rp 30,000,000 Current assets overstated 30,000,000 Total assets overstated 30,000,000 Owner s equity overstated 30,000,000 Income Statement: Cost of merchandise sold understated Rp(30,000,000) Gross profit overstated 30,000,000 Net income overstated 30,000,000 For Practice: PE 7-6A, PE 7-6B 89 88

90 Objective 7 Estimate the cost of inventory, using the retail method and the gross profit method. 90

91 91 Retail Inventory Method 7-7 The retail inventory method of estimating inventory cost is based on the relationship of the cost of merchandise available for sale to the retail price of the same merchandise. 91

92 92 Click to Determining edit Master Inventory by title style the Retail Method 7-7 A B C Cost Retail 1 Merchandise inventory, January 1 Rp19,400,000 Rp36,000, Purchases in January (net) 42,600,000 64,000, Merchandise available for sale Rp62,000,000 Rp100,000,000 3 Ratio of cost to retail price: (Rp 62,000,000:Rp 4 100,000,000) = 62% 4 5 Sales for January (net) 70,000, Merchandise inventory, January 31, at retail Rp30,000, Merchandise inventory, January 31, at estimated cost 7 8 (Rp30,000,000 x 62%) Rp18,600,

93 Example Exercise 7-7 A business using the retail method of inventory costing determines that merchandise inventory at retail is Rp900,000,000. If the ratio of cost to retail price is 70%, what is the amount of inventory to be reported on the financial statements? Follow My Example 7-7 Rp630,000,000 (Rp900,000,000 x 70%) For Practice: PE 7-7A, PE 7-7B 93 92

94 61 94 Gross Profit Method 7-7 The gross profit method uses the estimated gross profit for the period to estimate the inventory at the end of the period. 94

95 95 Click to Estimating edit Inventory Master by title style Gross Profit Method 7-7 A B C Cost Retail 1 Merchandise inventory January 1 Rp 57,000, Purchases in January (net) 180,000, Merchandise available for sale Rp 237,000, Sales for January (net) Rp 250,000, Less estimated gross profit (Rp250,000 x 30%) 75,000, Estimated cost of merchandise sold 175,000, Estimated merchandise inventory, January 31 Rp 62,000,

96 The gross profit method is useful for estimating inventories for monthly or quarterly financial statements in a periodic inventory system. 96

97 Example Exercise 7-8 Based on the following data, estimate the cost of ending merchandise inventory: Sales (net) Rp1,250,000,000 Estimated gross profit rate 40% Beginning merchandise inventory Rp100,000,000 Purchases (net) 800,000,000 Merchandise available for sale Rp900,000,

98 Follow My Example 7-8 Merchandise available for sale Rp900,000,000 Less cost of merchandise sold [Rp1,250,000,000 x (100% 40%)] 750,000,000 Estimated ending merchandise inventory Rp150,000,000 For Practice: PE 7-8A, PE 7-8B 98 97

99 Inventory turnover measures the relationship between the volume of goods (merchandise) sold and the amount of inventory carried during the period. Inventory turnover = Cost of merchandise sold Average inventory 99

100 HERO RIMO Cost Of Merchandise Sold Rp4,035,116,000,000 Rp87,696,796,439 Inventories Beginning Of Year Rp427,941,000,000 Rp24,907,993,901 End Of Year Rp494,919,000,000 Rp28,537,693,305 Average Rp461,430,000,000 Rp26,722,843,603 Inventory Turnover 8.74 times 3.28 times 100

101 Generally, the larger the inventory turnover, the more efficient and effective the management of inventory. 101

102 The number of days sales in inventory is a rough measure of the length of time it takes to acquire, sell, and replace the inventory. Number of days sales in inventory = Average inventory Average daily cost of merchandise sold 102

103 HERO RIMO Average Daily Cost Of Merchandise Sold Rp16,681,472,000/365 Rp11,055,112, Rp1,157,226,000/365 Rp240,265,196 Average Inventory Rp461,430,000,000 Rp26,722,843,603 Number Of Days' Sales in Inventory days days 103