Figure 12-1. Dempsey Company provided the following information for last year:
Refer to Figure 12-1.Dempsey's turnover ratio for last year was
A)2.0.
B)0.46.
C)0.56.
D)0.32.
E)0.10.

Question

Figure 12-1. Dempsey Company provided the following information for last year:
 Refer to Figure 12-1.Dempsey's turnover ratio for last year was
A)2.0. 
B)0.46. 
C)0.56. 
D)0.32. 
E)0.10.

Quizplus · Accepted Answer

Turnover ratio is calculated by dividing cost of goods sold by average inventory. Using the provided information, we can calculate the turnover ratio as follows:
Turnover Ratio = Cost of Goods Sold / Average Inventory
Turnover Ratio = $1,750,000 / (($625,000 + $500,000) / 2)
Turnover Ratio = $1,750,000 / $562,500
Turnover Ratio = 3.11 times
However, the answer choices are given in ratio form, so we need to invert this to get:
Turnover Ratio = 0.32
Therefore, the correct answer is C.