The correct answer is B. Decrease in inventory by Rs. 36,000.
Inventory turnover is a measure of how efficiently a company manages its inventory. It is calculated by dividing the cost of goods sold by the average inventory. A higher inventory turnover indicates that a company is selling its inventory more quickly, which is generally considered to be a good thing.
In this case, the company’s inventory turnover is 3, which means that it sells its inventory an average of 3 times per year. If the company can increase its inventory turnover to 5, it will be selling its inventory an average of 5 times per year. This means that the company will need to have less inventory on hand, which would result in a decrease in inventory.
The amount of decrease in inventory can be calculated using the following formula:
Decrease in inventory = (Old inventory turnover – New inventory turnover) * Average inventory
In this case, the decrease in inventory is:
Decrease in
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