Forecast sales using inventory turnover and markup on cost

Steps:

• Calculate cost of goods sold (COGS): Inventory turnover × Average inventory = 6 × $80,000 =$480,000
• Apply 25% markup on cost: Sales = COGS × (1 + 0.25) = $480,000 × 1.25 =$600,000

Why D is correct:

• Markup of 25% means sales equal COGS multiplied by 1.25, per standard cost-plus pricing formula, yielding $600,000 after COGS from turnover.

Why the others are wrong:

• A: $360,000 ignores markup and misapplies gross margin as 25% on sales (COGS × 0.75).
• B: $480,000 equals COGS but omits adding the 25% markup to reach sales.
• C: $576,000 uses incorrect 20% markup (COGS × 1.20) instead of 25%.

Final answer: D