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ISM Exam INTE Topic 5 Question 23 Discussion

Actual exam question for ISM's INTE exam
Question #: 23
Topic #: 5
[All INTE Questions]

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?

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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)

Contribute your Thoughts:

Jaime
24 days 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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Shaun
3 days ago
A) 0.575
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Valda
7 days ago
I think it's A) 0.575
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Victor
16 days ago
A) 0.575
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Lyla
1 months 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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Diane
7 days ago
B) 0.511
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Starr
15 days ago
A) 0.575
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Yen
1 months 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
2 months 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
2 months ago
I disagree, I believe the answer is A) 0.575.
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Carlene
2 months 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
20 days ago
The correct answer would be A) 0.575.
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Paris
23 days 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
25 days 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
29 days 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
2 months 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
2 months ago
I think the answer is C) 1.957.
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