Question

The Tampa Manufacturing Company had the following financial data for December 31, the end of the current year: Cost of Goods Sold $500,000 Beginning Merchandise Inventory 55,000 Ending Merchandise Inventory 45,000 What is the inventory turnover for the year?

Answer 1

Answer:

10

Explanation:

Inventory turnover calculation is cost of goods sold/average merchandise inventory

Average merchandise inventory is beginning merchandise + ending merchandise/2

Average Merchandise Inventory 55,000 + 45,000 = 100,000/2 = 50,000

Inventory Turnover 100,000/50,000 = 10

Answer 2

Answer:

10 times per year

Explanation:

Data provided in the question;

Cost of goods sold = $500,000

Beginning Merchandise Inventory = $55,000

Ending Merchandise Inventory = 45,000

Now,

Inventory turnover is calculated as:

Inventory turnover = $\frac{\textup{Cost of Goods Sold}}{\textup{Average Merchandise Inventory}}$

Also,

Average Merchandise Inventory = $\frac{\textup{Beginning inventory + Ending inventory}}{\textup{2}}$

or

Average Merchandise Inventory = $\frac{\textup{55,000 + 45,000}}{\textup{2}}$

or

Average Merchandise Inventory = 50,000

Therefore,

Inventory turnover = $\frac{\textup{500,000}}{\textup{50,000}}$

or

Inventory turnover = 10 times per year