Question

Calculate opening and closing inventory
Inventory turnover ratio =5times
Total sale= 200000
Gross profit=25%
Closing inventory is more by 4000 than opening inventory

Answer 1

Answer:

Inventory Turnover Ratio = CRFO/Average Inventory

Gross Profit is 25% on total sales = 2,00,000 × 25/100 = 50,000

CRFO = Net sales - Gross Profit

= 2,00,000 - 50,000

= 1,50,000

Inventory Turnover Ratio = CRFO / Average Inventory

5 = 1,50,000/ Average Inventory

Average Inventory = 1,50,000/5

= 30,000

Let Opening Inventory be = X

Closing Inventory is 4,000 more than Opening Inventory = X + 4,000

Average Inventory = Opening Inventory + Closing Inventory / 2

30,000 = X + X + 4,000 / 2

30,000 = 2X + 4,000 / 2

30,000 × 2 = 2X + 4,000

60,000 = 2X + 4,000

60,000 - 4,000 = 2X

56,000 = 2X

X = 56,000/2

Opening Inventory = X = 28,000

Closing Inventory = X + 4,000 = 28,000 + 4,000 = 32,000

Hope it helps

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