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4 October, 14:45

Robertson Corporationâs inventory balance was $22,000 at the beginning of the year and $20,000 at the end. The inventory turnover ratio for the year was 6.0 and the gross profit ratio 40%. Whatwere net sales for the year? A. $126,000 B. $200,000 C. $120,000 D. $210,000

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  1. 4 October, 16:20
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    D. $210000

    Explanation:

    Given that

    Inventory balance at the beginning = 22000

    Inventory balance at the end = 20000

    Inventory turnover = 6.0

    Gross profit ratio = 40%

    Average inventory = balance at beginning + balance at end / 2

    = 22000 + 20000/2

    = 21000

    Recall that

    Inventory turnover = cost of good sold/average inventory

    Thus,

    Cost of good sold = inventory turnover * average inventory

    = 6.0 * 21000

    = $126000

    Therefore

    Net sales = cost of good / 1 - gross profit ratio

    = 126000/1 - 0.4

    = 126000/0.6

    = $210,000
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