# Question 42 Chapter 4 of +2-B – USHA Publication 12 Class Q-42- CH-4 Book 2 - Usha Pub. +2 Book 2020 - Solution

Question 42 Chapter 4 of +2-B

III. Activity Ratios

Inventory Turnover Ratio

42. (Inventory T/O Ratio/G.P. on Cost) From the following detail, calculate the inventory turnover ratio :

 Opening Inventory ₹ 50,000 Closing Inventory ₹ 30,000 Sales (Revenue from Operation) ₹ 10,00,000 Gross Profit Ratio 25% on the cost

## The solution of Question 42 Chapter 4 of +2-B: –

 Inventory Turnover Ratio = Cost of goods sold Average Inventory
 Let assume the Cost of goods sold = X
 Gross profit = X X 25 100 = 1 X 4
 Cost of goods sold = Sales – Gross Profit Sales = Cost of goods sold + Gross Profit
 X + 1 X = ₹ 10,00,000 4
 4x + x = ₹ 40,00,000 5x = ₹ 40,00,000
 x = ₹ 40,00,000 5 X or Cost of goods sold = ₹ 8,00,000

 Average Inventory = Opening Inventory – Closing Inventory 2 = ₹ 50,000 + ₹ 30,000 2 Average Inventory = ₹ 40,000
 Inventory Turnover Ratio = ₹ 8,00,000 ₹ 40,000 Inventory Turnover Ratio = 20 Times

Also, Check out the solved question of previous Chapters: –