Question

The cost of goods sold for mcpherson fashions is $360,000. the beginning inventory for the firm was $20,000. twelve months later the ending inventory was $40,000. what is the firm's inventory turnover?

Answer 1

Inventory turnover = Cost of goods sold / Average Inventory

Average Inventory = (Beginning Inventory + Ending Inventory) / 2
                              = ($20,000 + $40,000) / 2
                              = $30,000

Inventory turnover = $360,000 / $30,000
                              = 12 times.