Caruso, Inc.has an inventory turnover rate of 8 times.If its cost of goods sold is $150,000, then
A) It sells its inventory 1,200 times per year.
B) The company will report sales of $1,200,000.
C) The gross margin will be $1,200,000.
D) The company's average inventory is $18,750.

Question

Quizplus · Accepted Answer

Inventory turnover rate = cost of goods sold / average inventory

8 = 150,000 / average inventory

Average inventory = 150,000/8 = $18,750.

Therefore, the best choice is D.