Opening Inventory Rs1,00,000; Closing Inventory Rs1,50,000; Purchases Rs6,00,000; Carriage Rs25,000; Wages Rs2,00,000. Inventory Turnover Ratio will be :
Answer & explanation
Correct answer: option 4
Cost of Revenue from Operation = Purchases + (Opening Inventory – Closing Inventory) + Direct Expenses
= 6,00,000+1,00,000-1,50,000+25,000+2,00,000
= 7,75,000
Average Inventory = (Opening Inventory + Closing Inventory)/2
= (100000 +150000)/2
= 1,25,000
Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory
= 7,75,000/1,25,000
= 6.2 Times