Question

23. If opening inventory is 38,500, closing inventory is? 41.500. Annual sales is 2,00,000 and Gross
profit is 25% on cost. Then the inventory turnover ratio will be:
(a) 3 times
(6) 4 times
(c) 4.5 times
(4) none of these​

Answer 1

Answer:

Let cost be x

Gross profit = sale-cost

25 %of x = 200000-x

x/4+x= 200000

5x=800000

x= 160000

average inventory = opening stock + clising stock /2

= 38500+41500/2 =40000

inventory turnover ratio ,= cost / average inventory

= 160000/40000= 4tikes

option b is correct

Answer 2

Answer:

Option (b). 4 times

Inventory Turnover Ratio = 4 times

Explanation:

Solution :

Inventory Turnover Ratio :

$\sf{\longrightarrow{\dfrac{CostOf \: Goods \: Sold}{Average \: Inventory}}}$

$\sf{\longrightarrow{\dfrac{Cost\:Of \: Goods \: Sold}{ \frac{Ope.ning \: Stock \: + \: Closing \: Stock}{2}}}}$

Let,

Cost Of Goods Sold = x

Sales = Cost Of Goods Sold + Gross Profit

2,00,000 = x + 25% of x

2,00,000 = x + $\frac{25x}{100}$

2,00,000 = x + 0 .25x

2,00,000 = 1.25x

x = 2,00,000/1.25

x = 1,60,000

Cost of Goods Sold = 1,60,000

★ Average Inventory =

$\sf{\longrightarrow{\dfrac{Ope.ning \: Stock \: + \: Closing \: Stock}{2}}}$

$\sf{\longrightarrow{\dfrac{38,500 \: + \: 41,500}{2}}}$

$\sf{\longrightarrow{\dfrac{80,000}{2}}}$

Average Inventory = 40,000

Inventory Turnover Ratio =

$\sf{\longrightarrow{\dfrac{CostOf \: Goods \: Sold}{Average \: Inventory}}}$

$\longrightarrow{\sf{\dfrac{1,60,000 }{40,000} \: = \: 4}}$

Inventory Turnover Ratio = 4 times

∴ The Inventory Turnover Ratio will be 4 times .