Use the following information for Razor Company to compute inventory turnover for 2011.
A) 8.33
B) 5.00
C) 4.95
D) 4.54
E) 7.33

Question

Quizplus · Accepted Answer

Inventory turnover ratio = Cost of goods sold / Average inventory
Given, 
Cost of goods sold for 2011 = $2,970,000
Beginning inventory for 2011 = $1,250,000
Ending inventory for 2011 = $1,500,000
Average inventory = (Beginning inventory + Ending inventory) / 2
                = ($1,250,000 + $1,500,000) / 2
                = $1,375,000
Hence, inventory turnover ratio = $2,970,000 / $1,375,000 = 2.16
Inventory turnover = 1/inventory turnover ratio
                    = 1/2.16
                    = 0.463
                    = 4.63 (approx.)
Therefore, the best option is C) 4.95.

Use the Following Information for Razor Company to Compute Inventory