Question

a) Inventory turnover ratio is 3 times. Revenue from operations is Rs. 1,80,000. Opening

inventory is 2,000 more than the closing inventory. Calculate opening and closing inventory when

goods are sold at 20% profit on cost.​

Answer 1

Answer:

Explanation:

Inventory Turnover ratio = cost of goods sold/ Average inventory

3 = 180000/ Average inventory

Average inventory= 60000

Let the closing inventory = x

opening inventory = 2000 +x +x

= 2000 +2x

Average inventory = Opening inventory + closing inventory / 2

= 2000 + 2x + x /2

=1000 + 3x/2

3x /2 = 1000

3x = 2000

x = 2000 /3

x = 666.6

Opening inventory = 2000 + x

= 2000 + 666.6

= 2666.6