Comparing revenue with inventory cost mixes measurement bases and inflates the apparent turnover.
Try this with your own numbersFormula and worked example
Turnover = period cost of goods / average inventory
| Input | Example |
|---|---|
| Cost of goods used or sold in period | 120,000 |
| Average inventory at cost | 20,000 |
| Calculated result | 6 turns per period |
Choose reliable inputs
Separate parts, technician time and bay availability for each repair order. For this auto repair calculation, use repair orders, parts invoices and technician time logs and a consistent definition of one repair order.
- Parts: include the portion belonging to this repair order or reporting period, and record where the value came from.
- Technician time: include the portion belonging to this repair order or reporting period, and record where the value came from.
- Shop overhead: include the portion belonging to this repair order or reporting period, and record where the value came from.
Use the same currency for every money input. Do not mix weekly costs with monthly revenue, or count the same expense in both an itemised cost and allocated overhead.
Why should inventory turnover use cost of goods?
Comparing revenue with inventory cost mixes measurement bases and inflates the apparent turnover.
Use cost on both numerator and denominator, not sales revenue against inventory cost.
What if this input changes?
If cost of goods used or sold in period rises by 10%, this example changes by 0.6 turns per period. This shows the effect of one change; it does not predict what will happen.
Open the calculator, save your baseline, then change the input supported by the least reliable estimate in your records. Compare both scenarios before committing to a price or capacity promise.