For 2017, Colorado Corp.'s cost of goods sold was $562,500 and their sales were $1,200,000.Assuming an inventory turnover of 3.5 for the year, what was the company's average inventory? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

First, we need to calculate the cost of goods sold (COGS) ratio:
COGS ratio = COGS / Sales = 562,500 / 1,200,000 = 0.46875

Then, we can calculate the inventory turnover:
Inventory turnover = Cost of goods sold / Average inventory = 3.5

Now we can use the inventory turnover formula to find the average inventory:
Average inventory = COGS / (Inventory turnover ratio) = 562,500 / 3.5 = $160,714 (rounded to the nearest dollar)

Therefore, the best choice is C.