Question

OPENING STOCK 60000, CLOSING STOCK 100000, STOCK TURN OVER RATIO 8 TIMES, SELLING PRICE 25% ABOVE COST. CALCULATE GROSS PROFIT RATIO

Answer 1

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Answer 2

20%

Explanation:

Given:

Opening Stock = 60,000

Closing Stock = 1,00,000

Stock turn over ratio = 8 Times

Selling price = 25% above cost

Gross profit ratio = ?

Average inventory = (Opening Stock + Closing Stock) / 2

= (60,000 + 1,00,000) / 2

= 80,000

Stock turn over ratio = Cost of goods sold / Average inventory

8 = Cost of goods sold / 80,000

6,40,000 = Cost of goods sold

Net sales = Cost of goods sold + 25% of Cost of goods sold

= 6,40,000 + 25% x 6,40,000

= 8,00,000

Gross profit ratio = Gross profit / Net sales

= (Net sales - Cost of goods sold) / Net sales

= (8,00,000 - 6,40,000 ) / 8,00,000

= 20%

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