What does "usage per $1000 sale" help determine in inventory management?

"Usage per $1000 sale" is a metric that helps to understand how much inventory is being used relative to sales generated. When analyzing this figure, it becomes clear how much inventory is sold for every $1000 in sales, thus guiding decisions about maintaining appropriate inventory levels.

Determining the proposed inventory level based on sales involves assessing how well the current inventory aligns with sales volume. If inventory usage is high relative to sales, it may indicate that the inventory level is optimal or needs adjustment. Conversely, if the usage is low, it may suggest that too much inventory is on hand, which can tie up capital unnecessarily.

This metric essentially links inventory management directly to sales performance, making it a crucial tool for maintaining efficiency and ensuring that the inventory on hand appropriately supports operational needs.