Question

Selected financial information for Feemster Company for 2012 follows. Sales $ 2,000,000 Cost of goods sold 1,400,000 Merchandise inventory Beginning of year 155,000 End of year 195,000. Required: Assuming that the merchandise inventory buildup was relatively constant, how many times did the merchandise inventory turnover during 2012?

Answer 1

The merchandise inventory turnover for Feemster Company in 2012 was 8 times; this was calculated by dividing the cost of goods sold, which was $1,400,000, by the average inventory amount of $175,000.

Step-by-step explanation:

To calculate the merchandise inventory turnover rate for Feemster Company in 2012, we need to use the formula:

Inventory Turnover = Cost of Goods Sold / Average Inventory

First, we find the average inventory for the year:

Average Inventory = (Beginning Inventory + End Inventory) / 2
Average Inventory = ($155,000 + $195,000) / 2
Average Inventory = $175,000

Then, we use the Cost of Goods Sold and Average Inventory to calculate the inventory turnover:

Inventory Turnover = $1,400,000 / $175,000
Inventory Turnover = 8 times

Thus, the inventory turned over 8 times during the year 2012.