In 2015, Hidey Company had average inventory of $86,000. The 2015 income statement showed net sales of $2,200,000 and gross profit of $420,000. In 2014, it was taking the company approximately 30 days to sell its inventory.
-The company's inventory turnover for 2015 was approximately
A) 20.7 times.
B) 2.7 times.
C) 25.6 times.
D) 4.9 times.

Question

Quizplus · Accepted Answer

Inventory turnover is calculated as Cost of Goods Sold (COGS) divided by Average Inventory. COGS is Net Sales minus Gross Profit, which is $2,200,000 - $420,000 = $1,780,000. Inventory turnover = $1,780,000 / $86,000 = 20.7 times.

In 2015, Hidey Company Had Average Inventory of $86,000