Which figure is used in the numerator when calculating the inventory turnover rate?

Which figure is used in the numerator when calculating the inventory turnover rate?

• A. Average inventory
• B. Cost of food sold
• C. Opening inventory
• D. Food cost

Answer: (B)

The main idea is that inventory turnover rate measures how quickly the kitchen uses up its inventory over a period. The numerator must reflect the cost of goods that were actually sold during that period, not what remained on hand. That is the cost of food sold. The denominator uses average inventory to smooth out fluctuations, typically calculated as (opening inventory + ending inventory) / 2. So, the correct figure in the top part of the fraction is the cost of food sold, because it represents the period’s actual usage of inventory. Opening inventory is only part of how you compute the average in the denominator, and “food cost” can refer to broader cost measures rather than the exact COGS for the period. For example, if the cost of food sold is 18,000 and the average inventory is 6,000, the turnover rate is 3.0, meaning the inventory turned over three times that period.

The main idea is that inventory turnover rate measures how quickly the kitchen uses up its inventory over a period. The numerator must reflect the cost of goods that were actually sold during that period, not what remained on hand. That is the cost of food sold. The denominator uses average inventory to smooth out fluctuations, typically calculated as (opening inventory + ending inventory) / 2.

So, the correct figure in the top part of the fraction is the cost of food sold, because it represents the period’s actual usage of inventory. Opening inventory is only part of how you compute the average in the denominator, and “food cost” can refer to broader cost measures rather than the exact COGS for the period. For example, if the cost of food sold is 18,000 and the average inventory is 6,000, the turnover rate is 3.0, meaning the inventory turned over three times that period.