Question : From the following information, calculate the inventory turnover ratio:
Inventory in the beginning = Rs.18,000 Inventory at the end = Rs.22,000 Net purchases = Rs.46,000 Wages = Rs.14,000 Revenue from operations = Rs.80,000 Carriage inwards = Rs.4,000
Option 1: 2 times
Option 2: 3 times
Option 3: 4 times
Option 4: 5 times
Correct Answer: 3 times
Solution : Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory Cost of Revenue from Operations = Inventory in the beginning + Net Purchases + Wages + Carriage inwards − Inventory at the end = Rs. 18,000 + Rs. 46,000 + Rs. 14,000 + Rs. 4,000 − Rs. 22,000 = Rs. 60,000 Average Inventory = Inventory in the beginning + Inventory at the end / 2 = Rs. 18,000 + Rs. 22,000/ 2 = Rs. 20,000 ∴ Inventory Turnover Ratio = Rs. 60,000/ Rs. 20,000 = 3 Times Hence option 2 is the correct answer.
Question : From the following information related to a company Opening inventory of Rs.20,000; Closing inventory of Rs.22,000; Purchases of Rs.80,000;
Wages Rs.9,000; Carriage outwards Rs.2,000; Returns outwards Rs. 1,000; Revenue from
operations Rs.80,000; Carriage
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