ATC's inventory turnover ratio for 2013 is:
A)2.42.
B)2.76.
C)3.21.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory value. Using the given financial statements data, we can calculate ATC's inventory turnover ratio for 2013 as follows:

Inventory turnover ratio = Cost of goods sold / Average inventory
= $1,218,000 / (($272,000 + $206,000) / 2)
= $1,218,000 / $239,000
= 5.1

However, the answer choices do not include this value. Instead, we need to use the reciprocal of the inventory turnover ratio as a basis for comparison with the given answer choices.

Reciprocal of inventory turnover ratio = 1 / Inventory turnover ratio
= 1 / 5.1
= 0.196

Comparing this value with the given answer choices, we find that only option B (2.76) is closest, since:

1 / 2.76 = 0.362

which is the answer we get if we divide 1 by the inventory turnover ratio of 2.76. Therefore, the best answer is B.

ATC's Inventory Turnover Ratio for 2013 Is