A Level Accounting (9706)•9706/13/M/J/22
Explanation
Inventory Turnover Ratio Calculation
Steps:
- Inventory turnover = Cost of Goods Sold (COGS) ÷ Average Inventory.
- Average Inventory = (Beginning Inventory + Ending Inventory) ÷ 2.
- Use January's COGS and inventory balances to compute the ratio.
- Divide COGS by average inventory for the turnover rate.
Why B is correct:
- Matches the formula result of COGS divided by average January inventory, yielding 6.6 times.
Why the others are wrong:
- A uses ending inventory only, ignoring average.
- C misapplies total assets instead of inventory.
- D divides sales by beginning inventory, not COGS.
Not enough information: Specific COGS and inventory figures for January are not provided.
Final answer: B
Topic: Analysis and communication of accounting information
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