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Rs. 3,00,000 is the Cost of Revenue from Operations (Cost of Goods Sold). Inventory Turnover Ratio 8 times; Inventory in the beginning is 2 times more than the inventory at the end. Calculate value of Opening and Closing Inventories

SOLUTION

Inventory Turnover Ratio = Cost of Goods sold / Average Inventory
8 = 3,00,000 / Average Inventory
Average Inventory = Rs. 37,500

Let Closing Inventory = x
Opening Inventory = 2x + x
= 3x

Average Inventory = Opening Inventory + Closing Inventory / 2
37,500 = 3X +X / 2
or, 4x = 75,000
X = 18,750

Closing Inventory = x = Rs 18,750
Opening Inventory = 3x
= 3 × 18,750
= Rs 56,250

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