Question 60

The inventory turnover rate is 8.4 turns.

The inventory turnover rate can be calculated by dividing the annual purchases by the average inventory value. In this case, $2,100,000 divided by $250,000 gives an inventory turnover rate of 8.4 turns.

A) 1.5 turns

This option represents a significantly lower turnover rate than what is calculated. An inventory turnover of 1.5 turns would indicate that the inventory is sold and replaced only 1.5 times per year, which does not align with the given data of annual purchases and inventory value.

B) 12 turns

This option suggests a higher turnover rate than the calculated value. An inventory turnover of 12 turns would mean that the pharmacy sells and restocks its inventory 12 times a year, which is inconsistent with the figures provided.

C) 11 turns

This option also indicates a turnover rate that exceeds the calculated result. An inventory turnover of 11 turns would imply that the inventory is sold and replaced 11 times annually, which is not supported by the relationship between the annual purchases and average inventory.

D) 8.4 turns

This option accurately reflects the calculation derived from the annual purchases and average inventory value. The ratio of $2,100,000 to $250,000 results in 8.4, confirming that this turnover rate is correct based on the provided data.

Conclusion

The correct answer, 8.4 turns, is definitively supported by the calculation of annual purchases divided by average inventory. The other options, 1.5, 12, and 11 turns, present incorrect turnover rates that do not align with the given financial figures, thereby confirming that D is the only viable answer.