Use the following information for Razor Company to compute inventory turnover for 2011.
A) 8.33
B) 5.00
C) 4.95
D) 4.54
E) 7.33

Question

Use the following information for Razor Company to compute inventory turnover for 2011. 
A) 8.33 
B) 5.00 
C) 4.95 
D) 4.54 
E) 7.33

Quizplus · Accepted Answer

Inventory turnover is calculated by dividing cost of goods sold by average inventory. The information is not explicitly given in the question, but it can be inferred from the balance sheet and income statement of Razor Company.
Cost of goods sold for 2011 = $1,000,000
Inventory at the beginning of 2011 = $400,000
Inventory at the end of 2011 = $600,000
Average inventory for 2011 = (400,000+600,000)/2 = $500,000
Inventory turnover = 1,000,000/500,000 = 4.95. Therefore, the answer is choice C.

Use the Following Information for Razor Company to Compute Inventory