B. The purpose of this question is to find out whether you know how several ratios are calculated, what they mean and how to use them. The ratios needed to answer this question are: (1) current ratio and quick ratio, and the fact that the primary difference between them is inventory in the numerator; (2) inventory turnover ratio; and (3) gross profit and gross profit margin.The current ratio is current assets / current liabilities. We know that current liabilities are $120,000 and the current ratio is 2. Therefore, current assets must be $240,000 ($120,000 × 2).The primary difference between the numerators of the current ratio and the quick ratio is inventory. (Note that prepaids and some other minor current asset items are excluded also from the numerator of the quick ratio when they are known. But since no information that would enable us to calculate those is given in this problem, we must ignore those for this problem.) Therefore, for this problem, the quick ratio is (current assets - inventory) / $120,000, and that is given as 1.5. So (current assets - inventory) must be equal to $180,000 ($120,000 × 1.5). Therefore, inventory is $240,000 - $180,000, or $60,000.The inventory turnover ratio is COGS / Inventory, and we are told that is 8. If COGS / $60,000 = 8, then COGS = $480,000 ($60,000 × 8).The gross profit margin is 40%. Since Sales - COGS = Gross Profit, if gross profit is 40% of sales, then COGS must be 60% of sales. Thus, COGS / .60 would equal sales. Since we now know that COGS is $480,000, we can calculate sales: $480,000 / .60 = $800,000.

C. This answer is incorrect. See the correct answer for a complete explanation.

D. This answer is the value for cost of goods sold. See the correct answer for a complete explanation.