87 :- Rs 2,00,000 is Cost of Revenue from Operations (Cost of Goods Sold), during the year. If Inventory Turnover Ratio is 8 times, calculate inventories at the end of the year. Inventories at the end is 1.5 times that of in the beginning.
Solution :-
Let Opening Inventory be x
Therefore, Closing Inventory will be 1.5x
Inventory Turnover Ratio = Cost of Revenue from Operation/Average Inventory
8 = 2,00,000/(Opening Inventory + Closing Inventory)/2
8 = 2,00,000 x 2/x + 1.5x
8 = 4,00,000/2.5x
20x = 4,00,000
X = Rs 20,000
Therefore, Opening Inventory is Rs 20,000
Closing Inventory = 1.5 x 20,000
= Rs 30,000