Question

If beginning inventory at cost was $12,000.00, ending inventory at cost $10,4000.00, and the cost of goods sold $18,000.00, what was the inventory turnover ratio at cost? (Round to the nearest hundredth)
1.61
2.00
1.27
2.61

Answer 1

Inventory turnover is
Cost of goods sold divided by the average merchandise inventory

First we should find the average merchandise inventory
Add the inventory on hand at the start of the year to the inventory on hand at the end of the year and divide the result by 2 to find the company's average inventory
(12,000+10,400)÷2=11,200

Now find the inventory turnover
Divide the company's cost of goods sold for the year by the average inventory to figure the company's inventory turnovers per year.
18,000÷11,200=1.61.....answer

Hope it helps