A company has $72,500 of inventory at the beginning of the year and $65,500 at the end of the year.Sales revenue is $986,400,cost of goods sold is $572,700,and net income is $124,200 for the year.The inventory turnover ratio is:
A)1.8.
B)8.3.
C)6.0.
D)14.3.

Question

Quizplus · Accepted Answer

The inventory turnover ratio formula is:

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Where,

Average Inventory = (Beginning Inventory + Ending Inventory) / 2

Substituting the given values:

Average Inventory = ($72,500 + $65,500) / 2 = $69,000

Inventory Turnover Ratio = $572,700 / $69,000 = 8.3

Therefore, the best choice is B.

A Company Has $72,500 of Inventory at the Beginning of the Year