Please feel free to request notes

Question 1
From the details given above, we can summarise the following figures:
    Particulars
    Quarter 1
    Quarter 2
    Difference
    Cost of Sales (A)
    990,000
    1,090,000
    100,000
    Inventory (B)
    640,000
    840,000
    200,000
    Inventory Turnover Ratio (A/B)
    1.55
    1.29
    0.5
    Time (D)
    90
    90
    
    Per day sales (A/D)
    11,000
    12,111.11
    
From the above table we derive the inventory turnover ratio which they reflect the company's ability to generate sales on the basis of the inventors as available undefined we can see in the above table that company generated $1.55 cost of sales to $1 inventory. This was reduced to 1.29 in the next quarter. We can see that the cost of sale increased by $100000 between quarter 1 and quarter 2 but the inventory increased by $200000. Inventory turnover ratio gives the cost of sales based on the inventory as held by an organization.( Ballou, R. H. (2000))
Based on the increment in the cost of sale the amount of inventory that should have increased was
=100000 / 1.55
= $64516.
Therefore the company only needed $64516 worth of inventory in order to generate the cost of sales of $100000 but an extra investment of $135484 ($200,000 - $64,516) was made which led to the decrease in the efficiency and therefore the inventory turnover ratio of fell.
Due to the extra investment of $135,484, the liquid working capital that is cash and cash equivalents of the company was blocked in inventories for approximately 11 days ($135,484 / $12,111) which was transferred to the third quarter.
Following are the recommendations to the management so that the same issue does not arise in the forthcoming quarters:
· Just in time inventory system should be implemented for the management of the inventory.
· For...