Question

Calculate inventory ratio when opening inventory is 5,00000purchases3,,90000net sales 600000 gross profit 30%

Answer 1

Given
Opening inventory=50000

purchases=390000

Revenue from operations=600000

Gross profit ratio = 30℅
then gross profit = sales×30℅
=600000×30℅=180000

Then closing stock = purchases+ opening stock+ gross profit-revenue from operations

closing stock=390000+50000+180000-600000
closing stock=620000-60000=20000

average stock = opening stock+ closing stock/2
average stock = 50000+20000/2=35000

Inventory Turnover Ratio = Average stock/sales
Inventory Turnover Ratio=20000/600000=1:30

Answer 2

Inventory turnover ratio = = 0.8659

Explanation:

Given:

Opening Inventories = 5,00,000

purchase = 3,90,000

Net sales = 6,00,000

Gross profit rate = 30% (On Sales)

Calculation of Cost of goods sold :

Sales = Cost of Goods sold + Gross Profit

6,00,000 = Cost of goods sold + 30% (sales)

6,00,000 = Cost of goods sold + 1,80,000

6,00,000 - 1,80,000 = Cost of goods sold

4,20,000 = Cost of goods sold

Cost of goods sold = Opening Inventory + Purchase - Closing inventory

4,20,000 = 5,00,000 + 3,90,000 - Closing inventory

Closing inventory = 4,70,000

Average inventory = (Opening Inventory + Closing inventory ) / 2

= (5,00,000 + 4,70,000 ) / 2

= 4,85,000

Inventory turn over ratio = Cost of goods sold / Average inventory

= 4,20,000 / 4,85,000

= 0.8659

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