Question

Calculate Inventory Turnover Ratio from the following: Opening Inventory 58000 Closing Inventory 62000 Revenue from Operations, i.e., Net Sales 640000 Gross Profit Ratio 25%​

Answer 1

Sales = 3,20,000

Gross Profit = 25% on Sales

.. Gross Profit

320000 ×25100

Cost of Goods Sold Total Sales -

Gross Profit= 3,20,000 - 80,000 = 2,40,000

Average Inventory=

Opening Inventory + Closing Invent

29000+ 31000 = 30000

Inventory Turnover Ratio= Cost of goods Sold

Average Inventory=240000×30000= 8 times

Answer 2

Explanation:

Solution :

★ Inventory Turnover Ratio :

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

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

Net Sales = 6,40,000

Gross Profit = 6,40,000 × (25/100)

Gross Profit = 1,60,000

Cost of Goods Sold = Net Sales - Gross Profit

6,40,000 - 1,60,000

480,000

Cost of Goods Sold = 4,80,000

$\sf{\longrightarrow{\dfrac{4,80,000}{ \frac{(58,000 \: + \: 62,000)}{2}}}}$

★ Average Inventory =

$\sf{\longrightarrow{\dfrac{58,000 \: + \: 62,000}{2}}}$

$\sf{\longrightarrow{\dfrac{1,20,000}{2}}}$

Average Inventory = 60,000

★ Inventory Turnover Ratio =

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

$\sf{\longrightarrow{\dfrac{4,80,000}{60,000}}}$

Inventory Turnover Ratio = 8 times

Therefore, Inventory Turnover Ratio = 8 times.