Asked by Andrew Cavender on May 16, 2024
Verified
The following information was available for Paul Company at December 31 2016: beginning inventory $90000; ending inventory $70000; cost of goods sold $968000; and sales $1360000. Paul's inventory turnover in 2016 was
A) 10.8 times.
B) 12.1 times.
C) 13.8 times.
D) 17.0 times.
Inventory Turnover
A measure of how frequently a company sells and replaces its stock of goods during a specific period, indicating the efficiency of inventory management.
Inventory
The total amount of goods and materials held by a company intended for sale or used in production.
- Compute inventory turnover and understand its implications on business operations.
Verified Answer
TW
Tabatha WilliamsMay 20, 2024
Final Answer :
B
Explanation :
Inventory turnover is calculated as Cost of Goods Sold divided by Average Inventory. Average Inventory is (Beginning Inventory + Ending Inventory) / 2. So, for Paul Company, Average Inventory = ($90,000 + $70,000) / 2 = $80,000. Inventory Turnover = $968,000 / $80,000 = 12.1 times.
Learning Objectives
- Compute inventory turnover and understand its implications on business operations.
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