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Question : Opening Inventory Rs.28,000

Closing Inventory Rs.52,000

Revenue from Operations (Sales) Rs.6,00,000

Gross Profit 25% on the cost of revenue from operations

The inventory turnover ratio will be ………

Option 1: 8 times

Option 2: 2.4 times 

Option 3: 1.2 times

Option 4: 12 times


Team Careers360 15th Jan, 2024
Answer (1)
Team Careers360 18th Jan, 2024

Correct Answer: 12 times


Solution : Answer = 12 times

Inventory Turnover Ratio = Cost of goods sold/Average Inventory

$\begin{gathered}\Rightarrow \quad 4,80,000 /40,000 \\ =12 \text { times }\end{gathered}$

Cost of goods sold = Sales - G.P

$x=6,00,000-\frac{x}{4}$

$\begin{aligned} 5 x & =6,00,000 \times 4 \\ x & =4,80,000\end{aligned}$

Cost of goods sold = 4,80,000

Average Inventory 

$\begin{aligned} & =\frac{28000+58000}{2} \\ & =80,000 / 2 \\ & =40,000\end{aligned}$
Hence, the correct option is 4.

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