use the following information for shafer company to compute inventory turnover for year 2. \n| | year 2 |…

use the following information for shafer company to compute inventory turnover for year 2. \n| | year 2 | year 1 |\n|--|--|--| \n| net sales | $652,500 | $583,900 |\n| cost of goods sold | 389,500 | 360,940 |\n| ending inventory | 78,700 | 80,380 |\nmultiple choice\n7.26\n4.90\n8.29\n5.90\n4.05

use the following information for shafer company to compute inventory turnover for year 2. \n| | year 2 | year 1 |\n|--|--|--| \n| net sales | $652,500 | $583,900 |\n| cost of goods sold | 389,500 | 360,940 |\n| ending inventory | 78,700 | 80,380 |\nmultiple choice\n7.26\n4.90\n8.29\n5.90\n4.05

Answer

Explanation:

Step1: Recall inventory turnover formula

Inventory turnover = $\frac{\text{Cost of goods sold}}{\text{Average inventory}}$

Step2: Calculate average inventory

Average inventory = $\frac{\text{Beginning inventory}+\text{Ending inventory}}{2}$. Since we only have ending - inventory for two years, we assume beginning inventory of year 2 is the ending inventory of year 1. So average inventory = $\frac{80380 + 78700}{2}=\frac{159080}{2}=79540$

Step3: Calculate inventory turnover

Inventory turnover for year 2 = $\frac{389500}{79540}\approx4.90$

Answer:

4.90