140 :- Opening Inventory Rs 2,00,000; Closing Inventory Rs 1,20,000. Inventory Turnover Ratio 8 Times; Selling price 25% above cost. Calculate Gross Profit Ratio.
Solution :-
Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
8 = Cost of Goods Sold/[(2,00,000 + 1,20,000)/2]
8 = Cost of Goods Sold/1,60,000
Cost of Goods Sold = 1,60,000 x 8
Cost of Goods Sold = Rs 12,80,000
Revenue from Operation = Cost of Goods Sold + 25% of Cost of Goods Sold
= 12,80,000 + 25/100 x 12,80,000
= 12,80,000 + 3,20,000
= Rs 16,00,000
Gross Profit = Revenue from Operation – Cost of Goods Sold
= 16,00,000 – 12,80,000
= Rs 3,20,000
Gross Profit Ratio = Gross Profit/Revenue from Operation x 100
= 3,20,000/16,00,000 x 100
= 20%