Question

Q 14. CALCULATE INVENTORY RATIO FOR THE YEAR 2015-16 AND 2016-17
2016-17
INVENTORY ON 31 MARCH
17,00,000
EMY MA
REVENUE FROM OPERATIONS
75,00,000
(GROSS PROFIT IS 25% ON COST OF REVENUE WROM OPERATION)
IN YEAR 2015-16 INVENTORY INCREASED BY 200,000​

Answer 1

Answer:

Inventory Turnover Ratio = Cost of goods sold (COGS)

Average Inventory

2015-16

Gross Profit = 25% of cost = 20% of sales = 20/100 X 75,00,000 = Rs. 15,00,000

Cost of goods sold = Revenue from operations - Gross profit

= 50,00,000 - 10,00,000

= Rs. 40,00,000

Average Inventory = 5,00,000 + 7,00,000 = 12,00,000 = Rs. 6,00,000

2 2

Inventory turnover ratio = 40,00,000 = 6.7 times

6,00,000

2016-17

Gross profit = 20% of sale = 20 X 50,00,000 = Rs. 10,00,000

100

Cost of goods sold = Revenue from operations - Gross profit

= 75,00,000 - 15,00,000

= Rs. 60,00,000

Average inventory = 7,00,000 + 17,00,000 = 24,00,000 = Rs. 12,00,000

2 2

Inventory turnover ratio = 60,00,000 = 5 times

12,00,000