a. Hillary Swank Clothiers had sales of $383,000 and a cost of goods sold of $260,000. What is the gross profit margin (ratio of gross profit to sales)?

b. If the average firm in the clothing industry had a gross profit of 25 percent, how is the firm doing?

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Joshua StredderLv10

21 Jan 2021

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Inventory Management Metrics Large retailers like Costco andTarget typically use gross margin ratio (gross margin /sales),inventory turnover (sometimes referred to as inventory turns), andgross margin return on investments (GMROI) to evaluate how wellinventory has been managed. The goal is to maximize profits whileminimizing the investment in inventory. Below are data for 4scenarios, a base scenario (A), followed by 3 modifications (B,C,&D) to the base sceranio.

Scenario A B C D

Sales $10,000 20,000 12,000 10,000

Cost of goods sold 6,000 12,000 6,000 6,000

Gross profit $4000 8,000 6,000 4,000

Average inventory $6,000 6,000 6,000 5,000

For each scenario calculate the gross margin percent, theinventory turnover, and GMROI.