Allison Co. has a beginning inventory costing $90,000 and an ending inventory costing $120,000. Sales were $380,000. Assume Allison's markup rate is 40%. Based on the selling price, the inventory turnover at cost (to the nearest hundredth) is:
A) 2.17
B) 2.22
C) 1.47
D) 1.58
E) None of these

Question

Quizplus · Accepted Answer

The inventory turnover at cost is calculated as Cost of Goods Sold (COGS) divided by the average inventory. First, calculate COGS using the sales and markup rate: COGS = Sales / (1 + Markup Rate) = $380,000 / 1.40 = $271,428.57. The average inventory is ($90,000 + $120,000) / 2 = $105,000. Inventory turnover = COGS / Average Inventory = $271,428.57 / $105,000 = 2.17.