CA Inter P4 · Chapter 2 · Question 7 of 12
Opening stock of raw material was ₹1,20,000, closing stock ₹1,80,000 and material consumed during the year ₹9,00,000. The inventory turnover ratio is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 6 times
Explanation
Average stock = (₹1,20,000 + ₹1,80,000) / 2 = ₹1,50,000. Inventory turnover ratio = material consumed / average stock = ₹9,00,000 / ₹1,50,000 = 6 times. Dividing by closing stock gives 5 times and by opening stock gives 7.5 times, both incorrect.
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