A firm has inventory turnover of 3 and cost of goods sold is Rs. 2,70,000. With better inventory…
Average inventory equals cost of goods sold divided by inventory turnover. It falls from ₹ 2,70,000 ÷ 3 = ₹ 90,000 to ₹ 2,70,000 ÷ 5 = ₹ 54,000, a decrease of ₹ 36,000. The…
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A firm has inventory turnover of 3 and cost of goods sold is Rs. 2,70,000. With better inventory management, the inventory turnover is increased to 5. This would result in :
(i) Decrease in inventory by Rs. 90,000
(ii) Decrease in inventory by Rs. 36,000
(iii) Increase in cost of goods sold by Rs. 20,000
(iv) Increase in inventory by Rs. 54,000
Which of the following is correct combination ?
Answer and explanation
Correct answer B
Average inventory equals cost of goods sold divided by inventory turnover. It falls from ₹ 2,70,000 ÷ 3 = ₹ 90,000 to ₹ 2,70,000 ÷ 5 = ₹ 54,000, a decrease of ₹ 36,000. The stated cost of goods sold remains ₹ 2,70,000, so the proposed increase of ₹ 20,000 is incorrect.
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Himachal Pradesh SET (HP SET)