Turns Raw Materials - Inventory Turns

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 The standard Inventory Turns formula, Annual Cost of Sales / Average Inventory Level, is used for sellable goods. How ever, how do you calculate your turns for raw materials? Since you do not directly sell your raw materials, you base your calculation on material usage, rather than sales.
Raw Material Inventory Turns =  Value of Actual Material Used / Value of Raw Materials Inventory.
Example: ABC Company used $20,000,000 of raw materials and their average inventory was $3,000,000.
 Therefore, their raw material inventory turns , $20M/ $3M = 6.66.

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