Gross margin turnover ratio determines inventory from sales Steps:

• Gross margin of 20% gives gross profit = 0.2 × $400,000 =$80,000, so COGS = $400,000 -$80,000 = $320,000.
• Gross margin turnover = sales ÷ opening inventory = 4 times.
• Opening inventory = sales ÷ 4 = $400,000 ÷ 4 =$100,000. Why C is correct:
• $100,000 equals sales divided by the given turnover ratio of 4, per the definition of gross margin turnover as sales to inventory. Why the others are wrong:
• A. $70,000: Underestimates by incorrectly adjusting for margin without basis.
• B. $80,000: Uses COGS ÷ 4 instead of sales, confusing it with standard inventory turnover.
• D. $140,000: Overestimates, possibly from dividing sales by a lower effective rate like 20% margin factor.

Final answer: C