A trader’s turnover was D36,000. Purchases was D28,000. The opening stock was D2,000 and the closing stock was D3,000.
What is the rate of turnover?
-
A.
13.5 times -
B.
10.8 times -
C.
9 times -
D.
5.4 times
Correct Answer: Option B
Explanation
The inventory turnover ratio is calculated by dividing the cost of goods sold for a period by the average inventory for that period
COGS / average stock = Rate of turnover
cogs = opening stock + purchases – closing stock
2000 + 28000 – 3000 = 27000
Average stock = opening stock + closing stock / 2
2000 + 3000 / 2 = 2500
Rate of turnover = 27000/ 2500 = 10.8 times