Question

. Average Inventory carried by a trader is 60,000; Inventory Turnover Ratio is 10 times; Goods are sold at a profit of 10% on cost. Find out the profit. (Ans. *60,000)b

Answer 1

ITR = 10 times

ITR = (Cost of goods sold)/Average Inventory

10 = cogs/60,000

cogs = 600,000

profit = 10% of cost

= 10% of 600,000

= 60,000

Answer 2

Profit = 60,000

Explanation:

Given :

• Average Inventory = 60,000
• Inventory Turnover Ratio is 10 times

Solution :

Inventory Turnover Ratio = 10 times

★ Inventory Turnover Ratio :

$\sf{\longrightarrow{\dfrac{Cost\:Of \: Goods \: Sold}{Average \: Inventory}}}$

$\sf{\longrightarrow\:10\: = \:{\dfrac{Cost\:Of \: Goods \: Sold}{60,000}}}$

Cost Of Goods Sold = 60,000 × 10

$\longrightarrow$ 6,00,000

Cost Of Goods Sold = 6,00,000

• Profit of 10% on Cost.

★ Gross Profit :

Gross profit = 6,00,000 × 10/100

$\longrightarrow$ 60,000

Gross profit = 60,000

Therefore, Profit will be 60,000.