Question

Opening Inventory ₹75,000; Closing Inventory ₹1,05,000; Inventory
Turnover Ratio 6; Gross Profit 20% on cost; what will be Gross Profit?

Answer 1

Answer:

Rs. 1,08,000

Explanation:

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Answer 2

Gross Profit will be ₹ 1,08,000

Explanation:

Solution :

Inventory Turnover Ratio = 6 times

★ Inventory Turnover Ratio :

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

$\sf{\longrightarrow \: 6 \: = \: {\dfrac{Cost \: of \: Goods \: Sold}{ \frac{Ope.ning \: Inventory \: + \: Closing \: Inventory}{2}}}}$

★ Average Inventory =

$\sf{\longrightarrow{\dfrac{Ope.ning \: Inventory \: + \: Closing \: Inventory}{2}}}$

$\sf{\longrightarrow \: 6 \: = \: {\dfrac{Cost \: of \: Goods \: Sold}{ \frac{75,000 \: + \: 1,05,000}{2}}}}$

$\sf{\longrightarrow \: 6 \: = \: {\dfrac{Cost \: of \: Goods \: Sold}{ \frac{1,80,000}{2}}}}$

$\sf{\longrightarrow \: 6 \: = \: {\dfrac{Cost \: of \: Goods \:Sold}{90,000}}}$

Cost of Goods Sold = 90,000 × 6

Cost of Goods Sold = 5,40,000

Gross Profit = 20% on Cost

= 5,40,000 × (20/100)

= 1,08,000

Gross Profit = ₹ 1,08,000

Therefore, Gross Profit will be ₹ 1,08,000