Adama's opening stock is D5,000. He purchased goods worth D30,000. His closing stock was D7,000 and sales D55,000
What is the rate of stock turnover.
A. 11 times B. 6 times C. 4.7 times D. 4 times
Correct Answer: C
Explanation
How to calculate inventory turnover ?
Determine the Cost of Goods from your annual income statement. Add your Beginning Inventory to your Ending Inventory. Divide the sum of the Beginning and Ending inventory in half to calculate the Average Inventory. Calculate the Inventory Turnover by dividing the Cost of Goods Sold by the Average Inventory.
rate of turnover= cost of goods sold / average stock. cost of goods sold= opening stock + purchases - closing stock 5,000 + 30,000= 35,000 - 7,000 = 28,000 Average stock is gotten as; 5000 + 7000 = 12,000 / 2 = 6,000 therefore rate of turnover= 28,000 / 6,000= 4.7 times
