Question

opening inventory 60,000 , closing inventory 1,00,000 stock turnover Ratio 8times, selling price 25% above cost. calculate the Gross profit ratio​

Answer 1

Answer: stock turnover ratio =  COGS /average inventory

                8     =  COGS / 80000

               COGS =  640000

               

        average inventory = opening + closing / 2

                                        = 60000 + 100000/2  = 80000

sale = 640000 +{ 640000×25/100}  =  800000

gross profit = sales - COGS

                   = 800000 - 640000  = 160000

GROSS PROFIT RATIO = GROSS PROFIT / SALES ×100

                                     = 160000 / 800000 ×100

                                     = 20 %