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

Answer:

inventory turnover ratio=cost of revenue from operations/average inventory

4=7,20,000/ average inventory

average inventory= 7,20,000/4

average inventory=1,80,000

(opening inventory+closing inventory)/2=180000

according to the question;

closing inventory=80%of opening inventory

we can write closing inventory =0.8 closing inventory

using this

(opening inventory+0.8 opening inventory)/2=180000

1.8 opening inventory=180000×2

opening inventory=360000/1.8

opening inventory= 200000

closing inventory=200000×80%

=160000

Explanation:

Hope it helps.

Regards

Answer 2

Explanation:

★Inventory Turnover Ratio :

$\sf{\longrightarrow{\dfrac{Cost \: of \: Revenue \: from \: Operation}{Average \: Inventory}}}$

$\sf{\longrightarrow{\dfrac{Cost \: of \: Revenue \: from \: Operation}{ \frac{Ope.ning \: Inventory \: + \: Closing \: Inventory}{2}}}}$

$\sf{\longrightarrow\:4\:=\:{\dfrac{7,20,000}{Average \: Inventory}}}$

Average Inventory = 1,80,000

★ Average Inventory =

$\sf{\longrightarrow{\dfrac{Ope.ning \: Inventory \: + \: Closing \: Inventory}{2}}}$

$\sf{\longrightarrow\:1,80,000\:=\:{\dfrac{Ope.ning \: Inventory \: + \: Closing \: Inventory}{2}}}$

Let,

• Opening Inventory = x
• Closing Inventory = 80% of x

$\sf{\longrightarrow\:1,80,000\:=\:{\dfrac{x \: + \: (80\% \:of\:x)}{2}}}$

$\longrightarrow$ 3,60,000 = x + 0.8x

$\longrightarrow$ 3,60,000 = 1.8x

$\longrightarrow$ x = 3,60,000/1.8

$\longrightarrow$ x = 2,00,000

Opening Inventory = Rs. 2,00,000

• Closing Inventory = 2,00,000 × (80/100)

$\longrightarrow$ 1,60,000

Closing Inventory = Rs. 1,60,000

Therefore,

• Opening Inventory = Rs. 2,00,000
• Closing Inventory = Rs. 1,60,000