Sum

₹ 3,00,000 is the Cost of Revenue from Operations (Cost of Goods Sold). Inventory Turnover Ratio 8 times; Inventory in the beginning is 2 times more than the inventory at the end. Calculate value of Opening and Closing Inventories

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#### Solution

Inventory Turnover Ratio=`"Cost of goods Sold"/"Average Inventory"`

`8 = 300000/"Average Inventory"`

Average Inventory = Rs 37500

Let Closing Inventory = x

Opening Inventory = 2x + x = 3x

Average Inventory

= `("Opening Inventory+ Closing Inventory")/2`

`37500 = (3x + x)/2`

or, 4x = 75000

x = 18750

Closing Inventory = x = Rs 18,750

Opening Inventory = 3x = 3 ×18,750 = Rs 56,250

Concept: Types of Ratios

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