A Level Accounting (9706)•9706/13/O/N/21
Explanation
Inventory Turnover Calculation
Steps:
- Recall the inventory turnover formula: Sales ÷ Average Inventory (used when COGS unavailable).
- Divide sales by average inventory: 20,000.
- Perform the division: 200,000 / 20,000 = 10.
- Result is 10.0 times, indicating inventory sells out 10 times per period.
Why C is correct:
- Matches the formula for inventory turnover using sales revenue over average inventory, a common approximation in basic financial analysis.
Why the others are wrong:
- A uses Purchases (20,000 = 6), but formula prioritizes sales.
- B (9.0) has no basis in given data or standard calculation.
- D (12.5) exceeds sales-based ratio and lacks supporting computation.
Final answer: C
Topic: Analysis and communication of accounting information
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