Inventory turnover using COGS from mark-up

Steps:

• Mark-up of 50% means selling price is 150% of cost, so COGS = revenue ÷ 1.5 = $240,000 ÷ 1.5 =$160,000.
• Inventory turnover rate = COGS ÷ average inventory = $160,000 ÷$25,000 = 6.4 times.

Why C is correct:

• Inventory turnover formula is COGS ÷ average inventory; here, $160,000 ÷$25,000 = 6.4, matching the definition of how often inventory sells based on cost.

Why the others are wrong:

• A: Uses $80,000 as COGS (misapplying mark-up as two-thirds of revenue).
• B: Treats mark-up as gross margin, so COGS = 50% of revenue ($120,000 ÷$25,000 = 4.8).
• D: Divides revenue by average inventory ($240,000 ÷$25,000 = 9.6), ignoring COGS adjustment.

Final answer: C