Question

From the following particulars calculate the
stock turnover ratio :
Opening stock Rs.40,000
Closing stock Rs.44,000
Sales Rs.4,15,000
Gross Profit ratio 20%

Answer 1

Answer:

Gross profit on sales :-

Cost of revenue from operation (cost of goods sold) = Revenue from operation - Gross profit

= 415000 - 83000 ( 20 % of 415000) = 332000 (COGS).

Then,

Formula = cost of revenue from operation (COGS) ➗ Average inventory

Formula for average inventory = opening inventory + closing inventory ➗ 2

40000 + 44000 ÷ 2 = 42000 (Average inventory).

Now,

COGS = 332000 ÷ 42000 = 7.9 / 7 times. (Answer)

Explanation:

Gross profit on sales :-

Calculation of cost of revenue from operation:-

Let cost of revenue from operation (COGS) be Rs. 100

Gross profit = 20

Revenue from operation = 100 +20 = Rs 120

If revenue from operation (Net sales) = 120 then cost of revenue from operations (cost on goods sold) is = rs. 100

If revenue from operations (net sales) = 415000, then cost of revenue from operation (COGS) = 100÷120 × 415000 = 345833.3 / 345834.

Average inventory = opening inventory + closing inventory ÷ 2

40000 + 44000 ÷ 2 = 42000 (Average inventory)

Then apply formula,

Cost of revenue from operation (COGS) ÷ Average inventory

345834 ÷ 42000 = 8.234 / 8 times (Answer).