In 20B,Landings Inc.provided the following information in their financial statements: Cost of goods sold under FIFO costing is $22.2 billion and their inventory value under FIFO is $1.3 billion at the end of 20B and $1.2 billion at the end of 20A.What would their inventory turnover ratio be under the FIFO cost flow method?
A)8.9
B)17.1
C)17.8
D)18.5

Question

Quizplus · Accepted Answer

Inventory turnover ratio is calculated by dividing the cost of goods sold by the average value of inventory. The average value of inventory can be calculated by adding the beginning and ending inventory values and dividing by 2.

Using the FIFO cost flow method:

Average inventory value = (1.2 + 1.3) / 2 = $1.25 billion

Inventory turnover ratio = Cost of goods sold / Average inventory value 
= 22.2 / 1.25 
= 17.76

Rounding to one decimal place, the inventory turnover ratio would be 17.8, which corresponds to choice C.