Question

Rs.2,00,000 is the cost of goods sold, inventory turnover 8 times; stock at the beginning is 1.5 times more than the stock at the end. Calculate the values of opening and closing stock.​

Answer 1

Explanation:

Cost of goods sold = ₹2,00,000

Inventory turnover ratio = 8 times

Accordingly,

8 = ₹2,00,000/Average inventory

Or, Average inventory = ₹2,00,000/8

Or, Average inventory = ₹25,000

Let, Closing inventory = x

Opening inventory = x+1.5x = 2.5x

So, opening inventory + closing inventory/2= ₹25,000

Or, 2.5x+x/2 = 25,000

Or, 3.5x = 25,000×2

Or, 3.5x = 50,000

Or, x = 50,000/3.5

Or, x = 14,286

So,Closing stock = ₹14,286

Opening stock = ₹14,286+(14,286×1.5)

= ₹35,715