The Inventory Turnover Calculation

question 22

Multiple Choice

The inventory turnover calculation:

• A)is wrong unless cost of goods sold is used in the numerator.
• B)is wrong unless sales is used in the numerator.
• C)is an alternative way of expressing the number of days' sales in inventory.
• D)requires knowledge of the inventory cost flow assumption being used.

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Definitions:

Operating Expenses

Operating expenses refer to the costs associated with the day-to-day functioning of a business, excluding direct production costs but including things like rent, utilities, and payroll.

Department Manager

A professional responsible for overseeing the operations, staff, and budget of a department within an organization.

Investment Center

A decentralized unit in which the manager has the responsibility and authority to make decisions that affect not only costs and revenues but also the fixed assets available to the center.

Authority

The power or right to make decisions, direct others, and enforce obedience within a particular scope.