ISM INTE Exam - Topic 5 Question 23 Discussion

Actual exam question for ISM's INTE exam

Question #: 23
Topic #: 5

MNO, Inc. is a manufacturing firm. MNO's end-of-year inventory is 54,000,000 and its cost of goods sold is $2,300,000. For the previous year, MNO's end-of-year inventory was $5,000,000 and the cost of goods sold was $3,000,000. What is this year's inventory turnover?

A0.575

B0.511

C1.957

D0.589

Show Suggested Answer

Suggested Answer: D

In the context of low-cost country sourcing and minimizing risk when importing goods, the selection of appropriate Incoterms 2020 rules is crucial.

DAP (Delivered at Place) is the most suitable Incoterm for a firm wanting to assume the least amount of risk. Under DAP, the seller is responsible for all costs and risks associated with delivering the goods to a specified destination, which includes transportation, export customs clearance, and any other logistical arrangements until the goods are made available for unloading at the buyer's location. This significantly reduces the buyer's risk as the seller handles most of the transportation and logistics.

Other Incoterms, such as:

CFR (Cost and Freight): The seller pays for the cost and freight to bring the goods to the port of destination. However, the risk is transferred to the buyer once the goods are loaded on the vessel.

CPT (Carriage Paid To): Similar to CFR, but can be used for any mode of transport. The seller covers transport costs to a specified destination, but the risk transfers to the buyer upon handing over the goods to the first carrier.

EXW (Ex Works): The buyer assumes all risks and costs from the seller's premises onward, making it the highest risk for the buyer.

Incoterms 2020 by the International Chamber of Commerce (ICC)

'A Guide to Incoterms 2020' by the International Trade Centre (ITC)

by Annelle at Mar 07, 2025, 06:22 AM

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Vincenza

6 months ago

I'm getting 0.511, seems off to me.

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Georgiana

6 months ago

Wait, last year's inventory was only 5 million? That's surprising!

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Bobbie

6 months ago

No way, it can't be that high!

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Holley

7 months ago

I think it's around 1.957, right?

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Cathrine

7 months ago

Inventory turnover is calculated as COGS divided by average inventory.

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Lea

7 months ago

I believe the formula is COGS divided by average inventory, but I can't recall if we should use last year's inventory for the average. This is tricky!

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Alise

7 months ago

I feel like I might be overthinking this. If I just use the end-of-year inventory for the calculation, I could get a quick answer, right?

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Arlie

8 months ago

I remember a similar practice question where we had to calculate inventory turnover, and I think it was around 1.5. This one seems different, though, with such a high inventory amount.

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Latonia

8 months ago

I think the inventory turnover is calculated by dividing the cost of goods sold by the average inventory, but I'm not entirely sure how to find the average inventory here.

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Tabetha

8 months ago

This seems straightforward enough. I'll just plug the numbers into the formula and see what I get. Shouldn't be too tricky as long as I don't mess up the calculations.

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Alonso

8 months ago

Okay, I think I've got this. The key is to calculate the average inventory for the current year, then divide the cost of goods sold by that. The question gives me the ending inventory and COGS for both years, so I can use that to find the average.

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Tamie

8 months ago

Hmm, I'm a little unsure about this one. I know inventory turnover has something to do with how quickly a company is selling its inventory, but I'm not totally clear on the exact formula. I'll have to think this through carefully.

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Lelia

8 months ago

This looks like a straightforward inventory turnover calculation. I'll need to use the formula: Inventory Turnover = Cost of Goods Sold / Average Inventory.

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Jaime

1 year ago

I wonder if the CEO of MNO, Inc. is as fun to hang out with as their name sounds. Anyway, time to crunch the numbers!

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Clorinda

11 months ago

C) 1.957

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Sanda

11 months ago

B) 0.511

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Rolland

11 months ago

I agree, A) 0.575 seems to be the correct answer.

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Shaun

1 year ago

A) 0.575

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Valda

1 year ago

I think it's A) 0.575

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Victor

1 year ago

A) 0.575

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Lyla

1 year ago

This must be a trick question. There's no way the answer is that simple. Let me re-read this a few times.

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Cora

12 months ago

I believe the answer is A) 0.575

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Carmela

12 months ago

I'm going with D) 0.589

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Bonita

12 months ago

I think it's C) 1.957

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Gracia

12 months ago

D) 0.589

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Catina

12 months ago

C) 1.957

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Diane

1 year ago

B) 0.511

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Starr

1 year ago

A) 0.575

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Yen

1 year ago

A manufacturing firm, huh? I bet they make some pretty cool stuff. Anyway, let's see... Inventory turnover, inventory turnover... Ah, got it!

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Kristofer

1 year ago

I calculated it based on the formula Inventory Turnover = Cost of Goods Sold / Average Inventory. That's why I chose C).

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Fletcher

1 year ago

I disagree, I believe the answer is A) 0.575.

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Carlene

1 year ago

Wait, do I need to account for the previous year's inventory and cost of goods sold? I better double-check the formula.

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Kerrie

1 year ago

The correct answer would be A) 0.575.

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Paris

1 year ago

In this case, the inventory turnover for this year would be $2,300,000 / (($54,000,000 + $5,000,000) / 2).

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Coletta

1 year ago

The formula for inventory turnover is cost of goods sold divided by average inventory. So, you need both years' data.

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Ashley

1 year ago

Yes, you need to account for both the current year and the previous year to calculate the inventory turnover.

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Charlene

1 year ago

Hmm, this seems straightforward. Let me think it through - the inventory turnover is the ratio of cost of goods sold to average inventory. Okay, I've got this!

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Kristofer

1 year ago

I think the answer is C) 1.957.

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