The French company has a beginning inventory of $77,000 and an ending inventory of $80,000. sales were $280,000. assume French's markup rate on the selling price 40%. based on the selling price what is the inventory turnover at cost. please explain?
French company has a beginning inventory of 77,000, and an ending inventory of $80,000.sales were $80,000.assume french's markup rate on selling price is 40%. Based on the selling price, what is the inventory turnover at cost? Round your answer to the nearest hundredht.
To calculate the inventory turnover at cost, we need to find the cost of goods sold (COGS) and the average inventory. Here's the step-by-step calculation:
Step 1: Calculate COGS:
COGS = Sales - Gross Profit
Given that the selling price markup rate is 40%, we can find the gross profit by dividing the sales by (1 + markup rate).
Gross Profit = Sales / (1 + Markup Rate)
Gross Profit = $280,000 / (1 + 0.40)
Gross Profit = $280,000 / 1.40
Gross Profit = $200,000
Therefore, COGS = Sales - Gross Profit
COGS = $280,000 - $200,000
COGS = $80,000
Step 2: Calculate the Average Inventory:
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Given that the beginning inventory is $77,000 and the ending inventory is $80,000, we can calculate the average inventory:
Average Inventory = ($77,000 + $80,000) / 2
Average Inventory = $157,000 / 2
Average Inventory = $78,500
Step 3: Calculate the Inventory Turnover at Cost:
Inventory Turnover at Cost = COGS / Average Inventory
Inventory Turnover at Cost = $80,000 / $78,500
Inventory Turnover at Cost ≈ 1.02
Therefore, the inventory turnover at cost is approximately 1.02. This means that the company sells and replaces its inventory slightly over once per year.
To calculate the inventory turnover at cost, you need to determine the cost of goods sold (COGS) and then divide it by the average inventory.
To find the COGS, you need to subtract the ending inventory from the beginning inventory and then add the sales. The formula is as follows:
COGS = Beginning Inventory + Sales - Ending Inventory
In this case, the beginning inventory is $77,000, the ending inventory is $80,000, and the sales are $280,000.
COGS = $77,000 + $280,000 - $80,000
COGS = $277,000
Once you have the COGS, you can calculate the average inventory by adding the beginning and ending inventories and dividing by 2. The formula is as follows:
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
In this case, the beginning inventory is $77,000, and the ending inventory is $80,000.
Average Inventory = ($77,000 + $80,000) / 2
Average Inventory = $79,500
Now that you know the COGS and the average inventory, you can calculate the inventory turnover at cost by dividing the COGS by the average inventory. The formula is as follows:
Inventory Turnover at Cost = COGS / Average Inventory
In this case,
Inventory Turnover at Cost = $277,000 / $79,500
Inventory Turnover at Cost ≈ 3.48
Therefore, the inventory turnover at cost for the French company is approximately 3.48.