6.8 Compute the inventory turnover rate
1) Inventory generates profit once it is stocked on the shelf.
2) Inventory turnover equals the cost of goods sold divided by ending inventory.
3) Inventory turnover measures the number of times a company turns over its beginning inventory during a period.
4) Other than the cost of purchasing the inventory, another large cost of inventory would be storage of the inventory.
5) The inventory turnover rate is computed by:
A) dividing average inventory by cost of goods sold.
B) dividing cost of goods sold by average inventory.
C) dividing ending inventory by cost of goods sold.
D) dividing ending inventory by beginning inventory.
E) dividing beginning inventory by cost of goods sold.
6) Inventory is often the largest:
A) expense on the income statement.
B) long-term asset on the balance sheet.
C) current asset on the balance sheet.
D) part of general selling expenses.
E) property, plant, and equipment on the balance sheet.
7) The inventory turnover ratio is normally computed for:
A) a buying season.
B) the entire year.
C) each monthly accounting period.
D) each quarter.
E) every sixth months.
8) Customer demand for an item CANNOT:
A) increase the inventory turnover.
B) decrease the inventory turnover.
C) affect the amount of merchandise the company purchases.
D) directly impact cash on the balance sheet.
E) affect sales.
9) Goods available for sale are $85,000; beginning inventory is $27,000; ending inventory is $19,000; and cost of goods sold is $63,500. What is the inventory turnover?
10) Goods available for sale are $118,000; beginning inventory is $37,000; ending inventory is $42,000; and
cost of goods sold is $77,000. What is the inventory turnover?