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Inventory turnover ratio three times. sales are 18000 opening inventory is 200 more than the closing inventory. calculate opening and closing inventory when goods are sold at 20% profit on cost?
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Inventory turnover ratio three times. sales are 18000 opening inventor...
Calculation of Opening and Closing Inventory
To calculate the opening and closing inventory, we need to determine the cost of goods sold (COGS) and the sales amount. Given that the inventory turnover ratio is three times and the sales are $18,000, we can calculate the COGS as follows:
1. Calculate the average inventory:
- Inventory turnover ratio = COGS / Average inventory
- Rearranging the formula, Average inventory = COGS / Inventory turnover ratio
- Since the turnover ratio is given as three times, Average inventory = COGS / 3
2. Calculate the COGS:
- COGS = Sales - Gross profit
- As the goods are sold at a 20% profit on cost, Gross profit = 20% of COGS
- Rearranging the formula, COGS = Sales / (1 + Gross profit rate)
- Substituting the given values, COGS = $18,000 / (1 + 20%)
3. Substitute the values into the average inventory formula:
- Average inventory = COGS / 3
- Substituting the calculated COGS value, Average inventory = ($18,000 / (1 + 20%)) / 3
4. Determine the closing inventory:
- Closing inventory = Average inventory - COGS
- Substituting the values, Closing inventory = [$18,000 / (1 + 20%)] / 3 - $18,000 / (1 + 20%)
5. Calculate the opening inventory:
- Opening inventory = Closing inventory + COGS
- Substituting the values, Opening inventory = [$18,000 / (1 + 20%)] / 3 - $18,000 / (1 + 20%) + $18,000 / (1 + 20%)
Explanation:
The opening and closing inventory can be calculated using the inventory turnover ratio, sales amount, and the profit percentage. The inventory turnover ratio reflects the number of times a company sells and replaces its inventory within a specific period.
First, we calculate the cost of goods sold (COGS) by subtracting the gross profit from sales. As the goods are sold at a 20% profit on cost, the gross profit is calculated as 20% of the COGS.
Next, we use the inventory turnover ratio formula to determine the average inventory. Since the turnover ratio is given as three times, the average inventory is equal to the COGS divided by three.
By substituting the calculated COGS value into the formula, we can find the average inventory. Once we have the average inventory, we can determine the closing inventory by subtracting the COGS from the average inventory.
Finally, we calculate the opening inventory by adding the closing inventory and the COGS together.
Overall, the opening and closing inventory can be determined by considering the inventory turnover ratio, sales amount, and the profit percentage on cost.
To calculate the opening and closing inventory, we need to determine the cost of goods sold (COGS) and the sales amount. Given that the inventory turnover ratio is three times and the sales are $18,000, we can calculate the COGS as follows:
1. Calculate the average inventory:
- Inventory turnover ratio = COGS / Average inventory
- Rearranging the formula, Average inventory = COGS / Inventory turnover ratio
- Since the turnover ratio is given as three times, Average inventory = COGS / 3
2. Calculate the COGS:
- COGS = Sales - Gross profit
- As the goods are sold at a 20% profit on cost, Gross profit = 20% of COGS
- Rearranging the formula, COGS = Sales / (1 + Gross profit rate)
- Substituting the given values, COGS = $18,000 / (1 + 20%)
3. Substitute the values into the average inventory formula:
- Average inventory = COGS / 3
- Substituting the calculated COGS value, Average inventory = ($18,000 / (1 + 20%)) / 3
4. Determine the closing inventory:
- Closing inventory = Average inventory - COGS
- Substituting the values, Closing inventory = [$18,000 / (1 + 20%)] / 3 - $18,000 / (1 + 20%)
5. Calculate the opening inventory:
- Opening inventory = Closing inventory + COGS
- Substituting the values, Opening inventory = [$18,000 / (1 + 20%)] / 3 - $18,000 / (1 + 20%) + $18,000 / (1 + 20%)
Explanation:
The opening and closing inventory can be calculated using the inventory turnover ratio, sales amount, and the profit percentage. The inventory turnover ratio reflects the number of times a company sells and replaces its inventory within a specific period.
First, we calculate the cost of goods sold (COGS) by subtracting the gross profit from sales. As the goods are sold at a 20% profit on cost, the gross profit is calculated as 20% of the COGS.
Next, we use the inventory turnover ratio formula to determine the average inventory. Since the turnover ratio is given as three times, the average inventory is equal to the COGS divided by three.
By substituting the calculated COGS value into the formula, we can find the average inventory. Once we have the average inventory, we can determine the closing inventory by subtracting the COGS from the average inventory.
Finally, we calculate the opening inventory by adding the closing inventory and the COGS together.
Overall, the opening and closing inventory can be determined by considering the inventory turnover ratio, sales amount, and the profit percentage on cost.
Community Answer
Inventory turnover ratio three times. sales are 18000 opening inventor...
Opening Inventory=5100
Closing inventory=4900
Closing inventory=4900
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Inventory turnover ratio three times. sales are 18000 opening inventory is 200 more than the closing inventory. calculate opening and closing inventory when goods are sold at 20% profit on cost?
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Inventory turnover ratio three times. sales are 18000 opening inventory is 200 more than the closing inventory. calculate opening and closing inventory when goods are sold at 20% profit on cost? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Inventory turnover ratio three times. sales are 18000 opening inventory is 200 more than the closing inventory. calculate opening and closing inventory when goods are sold at 20% profit on cost? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Inventory turnover ratio three times. sales are 18000 opening inventory is 200 more than the closing inventory. calculate opening and closing inventory when goods are sold at 20% profit on cost?.
Inventory turnover ratio three times. sales are 18000 opening inventory is 200 more than the closing inventory. calculate opening and closing inventory when goods are sold at 20% profit on cost? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Inventory turnover ratio three times. sales are 18000 opening inventory is 200 more than the closing inventory. calculate opening and closing inventory when goods are sold at 20% profit on cost? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Inventory turnover ratio three times. sales are 18000 opening inventory is 200 more than the closing inventory. calculate opening and closing inventory when goods are sold at 20% profit on cost?.
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