Question

Opening Inventory ₹ 1,00,000; Closing Inventory ₹ 1,50,000; Purchases ₹ 6,00,000; Carriage ₹ 25,000; Wages ₹ 2,00,000. Inventory Turnover Ratio will be ______.

Options

• 6.6 Times

• 7.4 Times

• 7 Times

• 6.2 Times

Answer 1

Opening Inventory ₹ 1,00,000; Closing Inventory ₹ 1,50,000; Purchases ₹ 6,00,000; Carriage ₹ 25,000; Wages ₹ 2,00,000. Inventory Turnover Ratio will be 6.2 Times.

Explanation:

Inventory Turnover Ratio = `"Cost of Revenue from Operations"/"Average Inventory"`

Cost of Revenue from Operations = Opening Inventory + Purchases + Carriage + Wages − Closing Inventory

= 1,00,000 + 6,00,000 + 25,000 + 2,00,000 − 1,50,000

= ₹ 7,75,000

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

= `(1,00,000 + 1,50,000)/2`

= `(2,50,000)/2`

= ₹ 1,25,000

Inventory Turnover Ratio = `(7,75,000)/(1,25,000)`

= 6.2 Times