Question

Moore Company has a beginning inventory at a cost of $50,000 and an ending inventory at a cost of $90,000. Sales were $150,000. Assume Moore's markup rate is 40%. Based on the selling price, what is the inventory turnover at cost?

Answer 1

The inventory turnover at cost for Moore Company is approximately 1.286 times during the given period.

To find the inventory turnover at cost, you can use the formula:

Inventory Turnover =
`(Cost of Goods Sold)/(Average Inventory at Cost)`

First, calculate the Cost of Goods Sold (COGS):

COGS=Sales−Gross Profit

Gross Profit=Sales×Markup Rate

Given:

Sales = $150,000

Markup Rate = 40%

\text{Gross Profit} = 150,000 \times 0.40 = $60,000

\text{COGS} = 150,000 - 60,000 = $90,000

Now, calculate the average inventory at cost:

Average Inventory at Cost= Beginning Inventory+Ending Inventory/2

\text{Average Inventory at Cost} = \frac{50,000 + 90,000}{2} = \frac{140,000}{2} = $70,000

Finally, use the formula for inventory turnover:

Inventory Turnover=
`(Average Inventory at Cost)/(COGS)`

​Inventory Turnover=
`(90000)/(70000)`≈1.286

Therefore, the inventory turnover at cost for Moore Company is approximately 1.286 times during the given period.