Jordan Precision Welding had sales of $134,000 for the month of June.The company's gross profit was $36,000.The company had beginning inventory of $70,000, and a physical inventory count indicated that ending inventory was $66,000.What was the company's inventory turnover ratio for June closest too?

Question

Quizplus · Accepted Answer

Inventory turnover ratio = Cost of Goods Sold / Average Inventory

First, we need to calculate the cost of goods sold:
Gross Profit = Sales - Cost of Goods Sold
$36,000 = $134,000 - Cost of Goods Sold
Cost of Goods Sold = $98,000

Next, we need to calculate the average inventory:
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Average Inventory = ($70,000 + $66,000) / 2
Average Inventory = $68,000

Now we can calculate the inventory turnover ratio:
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Inventory Turnover Ratio = $98,000 / $68,000
Inventory Turnover Ratio = 1.44

Therefore, the best choice is B, with an inventory turnover ratio closest to 1.44.

Jordan Precision Welding Had Sales of $134,000 for the Month