If a firm's inventories on hand are $200,000,its cost of goods sold is $600,000,and its sales are $800,000,what is the inventory turnover using cost of goods sold?

Question

Quizplus · Accepted Answer

Inventory turnover using cost of goods sold is calculated by dividing the cost of goods sold by the average inventory. The average inventory can be estimated by adding the beginning inventory and ending inventory, then dividing by 2.

In this case, we don't have the beginning and ending inventory figures, so we can just use the inventory on hand figure.

Inventory turnover = Cost of Goods Sold / Average Inventory
Inventory turnover = $600,000 / $200,000
Inventory turnover = 3 times

Therefore, the correct choice is B, 3 times.

If a Firm's Inventories on Hand Are $200,000,its Cost of Goods