Rs. 2,00,000 is the Cost of Revenue from Operations (Cost of Goods Sold), during the year. If Inventory Turnover Ratio is 8 times, calculate inventories at the end of the year. Inventories at the end is 1.5 times that of in the beginning.

SOLUTION

Inventory turnover ratio	Cost of Goods sold / Average Inventory
8	= 2,00,000 / Average Inventory
Average Inventory	= 25,000

Let Opening Inventory = x
Closing Inventory = 1.5 × x
= 1.5 x

Average Inventory	Opening Inventory + Closing Inventory / 2
25,000	x + 1.5 x / 2
Or, 2.5x	50,000
Or, x	20,000

Opening Inventory = x = Rs. 20,000
Closing Inventory = 1.5 x
= 20,000 × 1.5
= Rs. 30,000