Question

26. From the following information, calculate: (i) Inventory Turnover, and (ii) Gross Profit Ratio. Opening Inventory 18,000; Closing Inventory 22,000; Purchases 46,000, Wages 14,000; Revenue from Operations 80,000: Carriage Inwards. 4,000.​

Answer 1

Answer:

Cost of goods sold (cogs) = opening inventory + purchases + wages + carriage inward - closing inventory

= 18,000 + 46,000 + 14,000 + 4,000 - 22,000

= 60,000

Average Inventory = (18,000 + 22,000) /2

= 20,000

Inventory Turnover Ratio = COGS/Average Inventory

= 60,000/20,000

=3 Times

Gross Profit = Revenue from operations - COGS

= 80,000 - 60,000

= 20,000

Gross Profit Ratio = Gross profit x100 / Revenue from operations

gross profit ratio = 20,000x100/80,000 = 25 %