Question

Calculate gross profit ratio from the following information: Trade Payables Turnover Ratio 5 times; Average Trade Payable ₹ 2,00,000; Cash Purchases 1/5 of Credit Purchases; Inventory at the beginning was ₹ 80,000 and Inventory at the end was ₹1,00,000 more than the Opening Inventory; Net Profit ₹ 5,50,000; Operating Expenses ₹ 3,00,000; NonOperating Expenses ₹ 2,00,000; Non-Operating Incomes ₹ 1,50,000. (A) 37.5% (B) 55% (D) 45% (C) 50%​

Answer 1

Gross Profit Ratio = Gross Profit / Net Revenue from operations x 100.

Gross Profit Ratio = Gross Profit / Net Revenue from operations x 100.Gross Profit = Revenue from operations - Cost of Revenue from operations.

Gross Profit Ratio = Gross Profit / Net Revenue from operations x 100.Gross Profit = Revenue from operations - Cost of Revenue from operations.Average Inventory = 80,000 + 10,00,000 / 2 = 90,000.

Gross Profit Ratio = Gross Profit / Net Revenue from operations x 100.Gross Profit = Revenue from operations - Cost of Revenue from operations.Average Inventory = 80,000 + 10,00,000 / 2 = 90,000.Inventory Turnover Ratio = 8.

Gross Profit Ratio = Gross Profit / Net Revenue from operations x 100.Gross Profit = Revenue from operations - Cost of Revenue from operations.Average Inventory = 80,000 + 10,00,000 / 2 = 90,000.Inventory Turnover Ratio = 8.∴ Cost of revenue from operations = 8 x 90,000.

Gross Profit Ratio = Gross Profit / Net Revenue from operations x 100.Gross Profit = Revenue from operations - Cost of Revenue from operations.Average Inventory = 80,000 + 10,00,000 / 2 = 90,000.Inventory Turnover Ratio = 8.∴ Cost of revenue from operations = 8 x 90,000.= 7, 20, 000.

#BE BRAINLY!

Answer 2

Given:

Trade Payables Turnover Ratio 5 times; Average Trade Payable ₹ 2,00,000; Cash Purchases 1/5 of Credit Purchases; Inventory at the beginning was ₹ 80,000 and Inventory at the end was ₹1,00,000 more than the Opening Inventory; Net Profit ₹ 5,50,000; Operating Expenses ₹ 3,00,000; Non-Operating Expenses ₹ 2,00,000; Non-Operating Incomes ₹ 1,50,000.

To Find:

Calculate gross profit ratio from the following information:

​(A) 37.5% (B) 55% (D) 45% (C) 50%​

Solution:

The formula for trade payables turnover ratio is,

$R_{t}=\frac{credit purchase}{avg.tradepayables}$

Now put the values to calculate credit purchase,

$5=\frac{credit purchase}{200000} \\credit purchase=1000000$

It is given that cash purchase is equal to 1/5 of credit purchase, so

$Cash purchase=\frac{1}{5}*1000000\\=200000$

Now Total purchase is equal to credit purchase plus cash purchase, so

$Total purchase=1000000+200000\\=1200000$

Opening stock=80000

It is given that closing stock is 100000 more than opening stock, so

$closing stock=80000+100000\\=180000$

Now the formula for cost of goods sold(COGS) is,

$COGS=stock+purchase-closing stock$

$COGS=80000+1200000-180000\\=1100000$

Now computing the net profit,

Sales(balancing figure)                     2000000

less: COGS                                         1100000

Gross profit                                         900000

less: operating expense                     300000

operating profit                                   600000

less: non-operating expense              200000

add: net operating income                  150000

net profit                                                550000

so, the gross profit ratio is,

$GPR=\frac{gross profit}{sales}*100\\=\frac{900000}{2000000}*100\\=45\%$

Hence, the correct option is (d).