Asked by Erinn Whitlock on Jul 20, 2024
Verified
A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500.Its inventory turnover equals 3.4.
Cost of Goods Sold
Costs directly incurred from producing goods a company sells, involving the expenses for materials and labor.
Inventory Turnover
A ratio showing how many times a company has sold and replaced inventory over a period, indicating the efficiency of inventory management.
- Acquire knowledge on the criticality and calculation techniques of inventory turnover and its consequences on the functioning of business enterprises.
Verified Answer
LL
Lorena LopezJul 22, 2024
Final Answer :
True
Explanation :
Inventory turnover = Cost of goods sold / Average merchandise inventory
Therefore, Average merchandise inventory = Cost of goods sold / Inventory turnover
Plugging in the values given, we get:
Average merchandise inventory = 15,500 / 3.4 = 4,558.82
Since the actual average merchandise inventory is close to the given value of $4,500, option A is true.
Therefore, Average merchandise inventory = Cost of goods sold / Inventory turnover
Plugging in the values given, we get:
Average merchandise inventory = 15,500 / 3.4 = 4,558.82
Since the actual average merchandise inventory is close to the given value of $4,500, option A is true.
Learning Objectives
- Acquire knowledge on the criticality and calculation techniques of inventory turnover and its consequences on the functioning of business enterprises.
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