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 (markup is based on selling price)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 cost of goods sold (COGS) can be calculated as Sales - (Sales * Markup Rate) = $380,000 - ($380,000 * 0.40) = $228,000. The average inventory is ($90,000 + $120,000) / 2 = $105,000. The inventory turnover at cost is COGS / Average Inventory = $228,000 / $105,000 = 2.17.