Verbeke Inc.reported the following results from last year's operations: Last year's turnover was closest to:
A)16.67
B)0.06
C)2.10
D)0.48

Question

Verbeke Inc.reported the following results from last year's operations:  Last year's turnover was closest to:
A)16.67 
B)0.06 
C)2.10 
D)0.48

Quizplus · Accepted Answer

Turnover is defined as the cost of goods sold divided by the average inventory. From the given data, we can calculate the cost of goods sold as $125,000 ($100,000 beginning inventory + $50,000 purchases - $25,000 ending inventory). The average inventory can be calculated as ($100,000 beginning inventory + $25,000 ending inventory)/2 = $62,500. Therefore, the turnover is $125,000/$62,500 = 2.

Among the given choices, only option C (2.10) is closest to the calculated turnover of 2. Therefore, the best choice is C. Turnover = Sales ÷ Average operating assets = $6,300,000 ÷ $3,000,000 = 2.10