91 :- Following figures have been extracted from Shivalika Mills Ltd.;
Inventory in the beginning of the year Rs 60,000.
Inventory at the end of the year Rs 1,00,000.
Inventory Turnover Ratio 8 times.
Selling price 25% above Cost.
Compute amount of Gross Profit and Revenue from Operations (Net Sales).
Solution :-
Average Inventory = Opening Inventory + Closing Inventory/2
= 60,000 + 1,00,000/2
Average Inventory = Rs 80,000
Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
8 = Cost of Goods Sold/80,000
Cost of Goods Sold = Rs 6,40,000
Selling Price = 25% above Cost
Revenue from Operation = 6,40,000 + 25/100 x 6,40,000
= 6,40,000 + 1,60,000
= Rs 8,00,000
Gross Profit = Revenue from Operation – Cost of Goods Sold
= 8,00,000 – 6,40,000
= Rs 1,60,000