inventory turn over ratio

adarsh 03 April 2020 at 17:49 PM

During the year ended June 30, 20X5, Dixon’s Dog Supplies earned gross profit of $25,000, which represented a mark-up of 50%. Opening inventory was $3,000 and closing inventory was $5,000. The inventory turnover ratio was: a) 6.25 times b) 2.78 times c) 5.00 times d) 12.50 times.

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FACULTY 09 May 2020 at 11:58 AM

Gross profit = $25000

mark up = 50%

that means, cost of good sold =250000*100/50 = 50000

opening inventory =$3000

closing inventory = $5000

Average inventory = Opening inventory +closing inventory /2 = 3000+5000/2

average inventory = = 3000+5000/2 =4000

Inventory turnover ratio = cost of good sold/average inventory

=50000/4000

=12.5 (option D)