Question

cost of revenue from operations 720000
inventory turnover ratio 4 times
find out the value of opening inventory and closing inventory if closing inventory is 80% of opening inventory​

Answer 1

Inventory Turnover Ratio =

cost of Revenue from opertions(cost of Goods Sold)

Rs200000

8

Average Inventory

Average Inventroy

Average Inventory=Rs 25000

Average Inventory=

opening Inventory + Closing Inventory

2

Let the closing Inventory be x, So, opening Inventroy

=x+1.5 x

X + x + 1.5x

2

Hence,

-=Rs 25000

3.5x =Rs 50000

Rs50000

3.5

X =

=

Rs14286(Closing Inventory)

Thus Opening Inventory=Rs 14286 +1.5 Times of Rs

14286

Rs35715(i. e, Rs14286 × 2.5)

Answer 2

Solution :

•° Cost of revenue from operation = 7,20,000

°• Inventory turnover ratio = 4 times

•° Closing inventory = 80% of opening inventory

°• x = 80 % of x

• As we know that

→ Average inventory = opening inventory + closing inventory

→ Inventory turnover ratio = Cost of revenue from operation/Average inventory

→ 4 = 7,20,000/x + 80% of x

→ 4 = 7,20,000/x + 4x/5

→ 4 = 720000/5x + 4x/5

→ 4 = 720000/9x/5

→ 4 = 720000 × 5/9x

→ 4 × 9x = 720000

→ 36x = 720000

→ x = 720000/36 = 20000

°•° x = opening inventory = 20000

•°• 80% of x = closing inventory = 80/100 × 20000 = 16000