Question

a company earns a gross profit on 20%on cost it's credit sales are twice of its cash sales if credit sales is 500000calculate gross profit ratio

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Answer 1

Answer:

Gross Profit is calculated by the below equation:

Gross Profit = Sales - Cost of goods sold

In the given situation, gross profit is 20% on the cost of goods sold.

Hence, assume cost of goods sold is 100, than the sales will be Rs.100+ Rs.20 i.e. Rs.120

Accordingly

Cost of goods sold will be = Rs.150000 * 100

120

Cost of goods sold = Rs. 125000

Therefore Gross Profit = Cost of Goods sold * 20%

Gross Profit = Rs.125000 * 20%

Gross Profit = Rs.25000