A firm's beginning inventory is 5,000 units and ending inventory is 8000 units. If it sells 35,000 units per year, its stock turnover rate is 5 times.

Question

Quizplus · Accepted Answer

The stock turnover rate is calculated as Cost of Goods Sold (COGS) divided by average inventory. Assuming all units are the same, COGS here would be 35,000 units (sold units). Average inventory would be (5,000 beginning + 8,000 ending) / 2 = 6,500 units. Thus, turnover rate = 35,000 / 6,500 = 5.38 times, not exactly 5 times.

A Firm's Beginning Inventory Is 5,000 Units and Ending Inventory