A Company's January 1 Balance in Merchandise Inventory Is $51,000

question 88

Multiple Choice

A company's January 1 balance in Merchandise Inventory is $51,000. The December 31 balance is
$43,000. Cost of goods sold is $232,000. The company's inventory turnover is:

• A)4.55 to 1.
• B)4.94 to 1.
• C)5.40 to 1.
• D)10.8 to 1.

---

Definitions:

Absorption Costing

An accounting method that includes both variable and fixed production costs in the cost of goods sold.

Total Gross Margin

A financial metric that measures the difference between revenue and the cost of goods sold, indicating the profitability of sales before deducting operating expenses.

Variable Costing

A method of inventory costing that includes only variable manufacturing costs - direct materials, direct labor, and variable manufacturing overhead - in the cost of a product.

Net Operating Income

Income from a company's operations, calculated by subtracting operating expenses from operating revenue, excluding income and expenses from non-operating activities.