Question

Opening Inventory ₹ 80,000; Closing Inventory ₹ 1,20,000; Purchases ₹ 5,00,000; Carriage ₹ 30,000; Wages ₹ 20,000; Salaries ₹ 10,000; Inventory Turnover Ratio will be ______.

Options

• 5.5 Times

• 5.2 Times

• 5.6 Times

• 5.1 Times

Answer 1

Opening Inventory ₹ 80,000; Closing Inventory ₹ 1,20,000; Purchases ₹ 5,00,000; Carriage ₹ 30,000; Wages ₹ 20,000; Salaries ₹ 10,000; Inventory Turnover Ratio will be 5.1 Times.

Explanation:

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

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

= 80,000 + 5,00,000 + 30,000 + 20,000 − 1,20,000

= ₹ 5,10,000

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

= `(80,000 + 1,20,000)/2`

= `(2,00,000)/2`

= ₹ 1,00,000

Inventory Turnover Ratio = `(5,10,000)/(1,00,000)`

= 5.1 Times