If cost of food sold is $5,000 and average inventory is $1,000, what is the inventory turnover rate?

Prepare for the ManageFirst Controlling Foodservice Cost Test. Study with carefully designed flashcards and multiple-choice questions, complete with hints and explanations. Equip yourself for the exam!

Multiple Choice

If cost of food sold is $5,000 and average inventory is $1,000, what is the inventory turnover rate?

Explanation:
Inventory turnover rate measures how many times you sell and replace your inventory in a period. It’s calculated by dividing cost of goods sold by average inventory. Here, 5,000 divided by 1,000 equals 5, so the inventory turns five times in the period. This indicates relatively quick movement of inventory. The other numbers would require different inputs or calculations and don’t reflect these figures.

Inventory turnover rate measures how many times you sell and replace your inventory in a period. It’s calculated by dividing cost of goods sold by average inventory. Here, 5,000 divided by 1,000 equals 5, so the inventory turns five times in the period. This indicates relatively quick movement of inventory. The other numbers would require different inputs or calculations and don’t reflect these figures.

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