Epsom Co. manufactures furniture and sells about $40 million a year at a gross margin of 45%.
a. What is the maximum inventory level the firm can carry to maintain an inven- tory turnover (based on COGS) of 8.0?
b. If the inventory contains $1.2 million of obsolete and damaged goods that don't turn over at all, how fast would the active inventory have to turn over to achieve an overall turnover rate of 8.0?