Inventory classroom activity: item cards, turnover and worked answers

Prepare a paper warehouse for 45 minutes

Allow five minutes for opening inventory, ten for item cards, ten for costs, ten for turnover and ten for alternative averages. Draw three boxes: opening stock, purchased items and sold items. One student tracks units, another tracks cost and a third checks that sold items do not remain in closing inventory.

The period lasts exactly 90 days. Opening stock is 40 items, 100 are bought and 90 sold. Every item costs SEK 10 and sells for 18. Cost is unchanged and no items are damaged, returned or written down. The model includes no other purchase or selling costs. These assumptions make the cost flow straightforward to follow.

If the table does not fit, scroll it sideways.

Student worksheet: distinguish two amounts for the same sales

Calculate closing inventory in units and at cost. Next calculate revenue and cost for the 90 sold items. Inspect a deliberately incorrect turnover calculation that uses revenue as its numerator. Identify the price label that should be used instead, and explain why both revenue and cost can correctly describe the same sale in different ways.

Here we choose average inventory as opening plus closing cost value divided by two. Inventory turnover is cost of sales divided by that average. Also divide 90 days by turnover for a simplified days-of-inventory figure. Label the turnover as covering 90 days rather than a full year; a ratio without that label omits essential comparison information.

Answers: two turns during 90 days

Closing quantity is 40 + 100 − 90 = 50, valued at SEK 500. Revenue is 90 × 18 = 1,620 and cost of sales 90 × 10 = 900. Gross profit before other costs is 720. Only 900 is the correct numerator for our inventory-turnover definition; the selling price belongs to a different calculation.

Average inventory is (400 + 500) / 2 = 450. Turnover is 900 / 450 = 2 during the period, and 90 / 2 = 45 days under the simplified method. This does not mean every item actually stayed on the shelf for 45 days. Revenue 1,620 as numerator would produce 3.6, using selling price and measuring something else.

Teacher notes: compare two points with four observations

Reveal additional inventory observations: 40 items on day 0, 80 on day 30, 120 on day 60 and 50 on day 90. The simple average of these four equally spaced observations is 72.5 items, equivalent to SEK 725. With the same cost of sales, turnover is approximately 1.24 under this different method.

The four-point average is not a complete daily or time-weighted inventory average. It shows how selected observations can change the denominator when stock fluctuates. Assess whether students state method and period before comparing two ratios. Finish by identifying missing stock information. This is a paper teaching warehouse, not an inventory-management feature in Investiq.