Given an opening inventory of $9,000, a closing inventory of $12,000, and a cost of food sold of $22,000, what would the inventory turnover for this establishment be?

Given an opening inventory of $9,000, a closing inventory of $12,000, and a cost of food sold of $22,000, what would the inventory turnover for this establishment be?

• A. 2.1
• B. 1.9
• C. 2.5
• D. 3.0

Answer: (C)

Inventory turnover shows how many times inventory is sold and replaced over a period. It is computed as cost of goods sold divided by the average inventory for the period. Average inventory is (opening inventory + closing inventory) / 2. Here, average inventory = (9,000 + 12,000) / 2 = 10,500. Cost of food sold is 22,000. So turnover = 22,000 / 10,500 ≈ 2.095, which rounds to about 2.1. This means the inventory turns over a little more than twice during the period. Using only opening or only closing inventory would yield different numbers (for example, 22,000 divided by 9,000 ≈ 2.44 or by 12,000 ≈ 1.83), but the standard method uses the average inventory.

Inventory turnover shows how many times inventory is sold and replaced over a period. It is computed as cost of goods sold divided by the average inventory for the period. Average inventory is (opening inventory + closing inventory) / 2.

Here, average inventory = (9,000 + 12,000) / 2 = 10,500. Cost of food sold is 22,000. So turnover = 22,000 / 10,500 ≈ 2.095, which rounds to about 2.1.

This means the inventory turns over a little more than twice during the period. Using only opening or only closing inventory would yield different numbers (for example, 22,000 divided by 9,000 ≈ 2.44 or by 12,000 ≈ 1.83), but the standard method uses the average inventory.