Question

Noodles Manufacturing Company has an opening inventory of Rs6,20,000
and a closing inventory of
Rs7,80,000. The inventory turnover ratio is 5 times and gross profit margin is 20%.
Required: (a) Cost of goods sold
(b) sales

​

Answer 1

Answer: COGS = Rs. 35,00,000/- , Sales = Rs.43,75,000/-

Explanation:

Average Inventory = Opening inventory + Closing inventory

                                                                      2

Therefore, Average Inventory = Rs.7,00,000

Inventory turnover ratio = COGS / Average inventory

                          => 5       = COGS/700000

                        => COGS = 700000 * 5 = Rs. 35,00,000

Sales =  (COGS /100- GP Margin)*100

         =  (3500000 /100- 20)*100

         = 43,75,000/-